Abstract:

In the context of India’s ambitious electric vehicle targets, the author examines two related questions. First, which electric vehicles should be funded based on lifetime costs? Second, which subsidy option would be the most cost-effective based on lifetime subsidies? Electric two-wheelers, three-wheelers, four-wheeler taxis, and buses do not need to be subsidized, according to this study, because they are already cost competitive with comparable internal combustion engine vehicles. This study also finds that personal cars and long-haul trucks need to be subsidized significantly, by one-third to one-half of the upfront costs. Finally, this study find that an upfront subsidy is the most cost-effective subsidy option, followed by a per kilometer subsidy, which is effectively 19–31% costlier, whereas financing subsidies are found to be the least cost effective. The results suggest that a cost-effective policy in India would be to subsidize only personal cars and long-haul trucks, while using the upfront subsidies.