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New Delhi. There may be an increase in the prices of electric vehicles in India in the coming time. The reason for this is a policy decision taken by China, which has increased the concern of the Indian EV industry. According to the report, this decision has come at a time when the tax benefits available to electric vehicles are gradually decreasing compared to petrol-diesel vehicles.

China has announced to reduce the tax rebate on export of lithium-ion batteries from 9 percent to 6 percent. This change will come into effect from April 1. Along with this, China is also planning to completely eliminate this incentive within the next one year. This decision was taken on January 8.

Many Indian electric vehicle manufacturing companies are largely dependent on China for batteries. Chinese companies like BYD and CATL are major suppliers to the Indian market. In such a situation, there is a possibility of battery cost increasing due to reduction in tax rebate and sharp rise in lithium prices in the last one year.

The battery accounts for more than one-third of the total cost of an electric vehicle. If batteries become expensive, it will directly impact the profits of vehicle manufacturers. In such a situation, companies will have only two options. Either reduce profits or pass on the increased costs to customers.

According to the report, those companies which are dependent on short-term battery supply agreements will be most affected. For these companies, the impact of cost increases may be felt sooner and more heavily.

According to media reports, a senior official of a company believes that the effect of this decision can be seen in the market in the next two weeks. Companies may try to quickly stock up on batteries before the tax rebate decreases. Due to which the pressure on the supply chain is also likely to increase.