The Central Government has mandated procurement of electric vehicles by ministries and departments. It has also increased the Net Dealer Price cap for electric vehicles significantly to Rs 20 lakh. Earlier, the cap was Rs 10 lakh for Internal Combustion Engine Vehicles. This makes way for a greater variety of electric vehicles to be procured by the government. This is one of the most straightforward ways the Government has been promoting electric vehicles. The new guidelines have been issued by the Department of Expenditure under the Ministry of Finance and were reported on November 11. The guidelines mandate that electric vehicles should generally be procured by ministries and departments.
This would mean that the Government’s default option for procurement is now electric vehicles instead of petrol and diesel vehicles. Officials believe this will stimulate a constant flow of government demand for the electric vehicle industry.
This caused a positive reaction in the market. Several automobile and electric vehicle companies saw their stocks surge. Mahindra & Mahindra saw their stock surge 4.81% to hit a high of Rs 3449. Ola Electric Mobility saw its stock rise 3.53% to Rs 35.16. With increasing confidence that the increased price cap and default electric vehicle option would increase the market size for electric vehicles, the market reacted positively.
By increasing the price cap and mandating electric vehicles, the Government have sent clear signals that they are committed to pushing forward the electric mobility in India. By increasing the price cap to Rs 20 lakh, it means there is more variety available to the Government to choose from when purchasing electric vehicles. They can now purchase electric cars that were previously out of the price cap. This will also accelerate the transition to institutional demand. As the Government begins replacing their staff vehicles with electric vehicles, there will be a significant amount of order quantity which can give manufacturers more consistent demand. This may lead to more investment into producing electric vehicles across the country.