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Electric cars in India: Are they really cost-effective?

Updated: Jul 7



Thinking of buying an electric car? Do you know if it’s more economical than its gasoline-powered (petrol, diesel, gas) counterparts?

This question has befuddled the car buyers in India for long. Given India’s infrastructural bottlenecks and low per-capita income; the poor adoption rates of electric vehicles (EV) creates doubts in buyers’ minds. The Indian government has set a target of 30% electric vehicles on the road by 2025 for their fuel efficiency and environmental benefits, but for an average Indian car buyer, ‘cost-saving’ still remains the prime purchase consideration.

If you are not deterred by the expensive upfront price; electric cars can help you achieve economies in a few years time. The overall cost of ownership of these battery-operated mobility vehicles turns out to be equal or lower when compared to the ICE (internal combustible engine) vehicles.

A thorough cost-benefit analysis can highlight how electric cars prove to be cheaper than conventional vehicles in the long run. But, before that let’s look into the outright and obvious advantages of purchasing an EV in India.


Benefits of Owning an EV:


Electric cars are greener

EVs are zero-emission mobility vehicles that help in reducing the country’s carbon footprints. You can flaunt that green number plate with immense pride for causing less pollution and boosting the air quality. As per Niti Aayog’s estimates, EVs are likely to cut down on India’s carbon emissions by 37% by 2025. So,your eco-friendly vehicle can make you feel good about your contribution to the ‘green cause’.


Charging Electric cars at home

EVs can save you the hassle of standing in long queues at petrol pumps. You can have a low-cost slow EV charging system installed at home. Besides being convenient, it will also help you save a lot of effort and time.


Smoother rides

Driving an EV is a much calmer experience, and rides are smooth with instant acceleration. At the same time, they are safer too, as there is no combustible or explosive fuel in the car.


Low cost of maintenance

Electric vehicles don’t have an internal combustion engine. Therefore, they don’t need regular engine oil changes, oil filter changes, or engine inspections. The motors at the heart of every EV are extremely reliable because they have absolutely no moving parts that rub or touch each other - so you as the owner don’t need to worry about lubrication or wear and tear.


No cost of fuel in electric cars

Electricity costs are almost negligible when compared to petrol and diesel prices. The prices of these gasoline products are highly volatile globally, and always increasing in India. The cost per km of running battery-operated cars comes out to be next to nothing as compared to the cost of fueling up an internal combustion vehicle.

The benefits of owning an EV don’t end just here. The real advantage of these battery-powered mobility solutions lies in substantial cost savings spread over their entire lifetime. The economic efficiency of EVs vis-a-vis the ICEs can be more accurately accessed by comparing their total cost of ownership (TCO).


What is total cost of ownership – How EVs outrun ICEs:

The total cost of ownership of any asset is the total of all costs incurred during its lifetime. The cost components for a vehicle can be broadly classified into three categories:

  1. Purchase cost – The upfront costs of buying

  2. Operation cost – Fuel/electricity costs

  3. Maintenance cost –Servicing and general upkeep

According to the latest report by Economic Times, the total cost of ownership of EVs is equal to that of ICEs, for the usage of 1.60 lakh km in India. So, the sooner you hit this benchmark, the earlier you achieve the required economies.

Delving deeper into cost parameters can give further insight into how electric vehicles can turn out to be lighter on the pocket as compared to their conventional mobility variants in India.

EVs versus ICEs- Total cost of ownership


How much does an electric car cost to buy?

The initial high cost of purchase of the EV is the biggest impediment to the adoption of these cars in the country. The top 10 ICE vehicle models in India cost around INR 8 lakh (based on 2019 sales figures). While the average cost of the 3 most popular EVs (under INR 15 lakh: Tata Tigor EV, Tata Nexon EV Mahindra e-Verito,) is approximately INR 12.5 lakh.

The component that makes up for the bulk of these upfront costs is the price of lithium-ion technology batteries used in these cars. These batteries account for almost 40 percent of an EV's cost. However, the good news is- the manufacturing cost of these batteries has seen a 98 percent drop since 1990 and a 50 percent drop since 2016. With the increasing penetration rate of these cars, the costs are likely to go down even further.

What are the Operational costs of an electric vehicle:

Running the vehicle on road entails a high fuel cost. But a switch from petrol/diesel to electricity holds huge potential for cost savings. Operating costs are the segment where EVs are far ahead of ICEs in terms of financial advantages.

The cost of running EVs in India (INR 1 per km) is much lower in comparison to petrol vehicles (INR9 per km), diesel vehicles (INR 6 per km), and CNG vehicles (INR 2.5 per km).

This is based on charging the EV at home with a slow charger that is available with almost every EV. This slow charger takes 6-8 hours to fully charge a 40 kWh EV battery. Considering the electricity charges in New Delhi which are around INR 6.25 per unit; fully charging a 40 kWh battery would cost INR 250. For cars like Tata Nexon EV that claim to cover 300 kilometers on a single charge, this cost essentially comes to INR 1 per km.

What is the maintenance cost of an EV:

This is another cost category where electric cars fare much better than internal combustion cars. With fewer moving parts and fewer liquids to be pumped in, electric cars go easy on brake systems. They also don’t require the replacement of spark plugs, oil filters, or gearboxes. This substantially reduces the maintenance cost of battery-operated vehicles, sometimes to over half of that of ICE maintenance charges.

Besides, the Indian government also provides financial support by way of concessions and tax incentives, to promote indigenous manufacturing and boost the demand for green mobility solutions in the country.


What are the tax benefits, subsidies, and concessions for Electric Cars in India?

● The GST on electric vehicles and chargers (5%) is much lower than the GST rate for petrol, diesel, and hybrid vehicles (28%)

● RTO (Regional Transport Office) charges for EV stand at INR5000 as against INR 1.45 lakh for petrol or diesel vehicles in Delhi, and these cost differences are similar in most parts of India

● One can claim an income tax deduction of INR1.50 lakh on loan payments for EVs, resulting in direct savings of up to INR 45,000 in income tax payable in the year of purchase

All these yearly costs when added throughout an electric vehicle’s lifetime can reap incredible cost savings.

So, after a thorough cost analysis, if you think that electric cars are more economical than combustion-engined cars, then you are quite right! Running an EV for about 70+ km per day can easily offset the upfront costs within 2 to 3 years owing to much lower fuel costs. So, if you are an individual or business whose average travel falls within this range, you should consider EVs for your next purchase to save money on fuel. With the government pushing for EV-friendly policies, these green cars are the future of India.


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