India’s car battery market is booming, thanks to its government’s subsidised sale of low-cost car parts and its low taxes on batteries.
It is also thanks to cheap labor.
In the last year, car parts makers have made huge profits from selling battery packs made by Tata Motors, Mahindra, Mahin and others, which are being sold in a market of $100bn a year.
The Indian government subsidises the cost of car batteries, a major contributor to the growth in the market, by making a 30 per cent tax on the earnings of car parts suppliers.
But the tax is so low that it can make up for the low profit margins in the Indian car industry, which is largely run by small companies.
India has the second-largest car battery manufacturing capacity after the US and China.
About 60 per cent of the world’s car batteries have been produced in India, but the country has been exporting batteries to Europe, China and other countries.
Indian carmakers say they are not making a profit on battery parts.
But analysts say it is possible that they are paying a huge tax on batteries that are being exported abroad and that this tax has been used to subsidise the manufacturing of parts in India.
Indian cars are often more efficient than those made in other countries, but manufacturers are paying the price.
“We pay taxes on every piece of assembly machinery.
There is a tax on electricity and diesel fuel, as well as on labour costs,” said N.K. Raghavan, an independent analyst at the Economic Times.
“There is no doubt that it is a significant subsidy, and there is a big tax advantage for these companies.”
The government has said that car batteries will cost more in the future than they did last year.
A report from the National Economic Research Institute (NERI) said the battery cost for a new vehicle in 2020 will be about 4 per cent higher than in 2017.
But India’s tax revenue from car batteries is about $4bn, making the government’s subsidy look attractive.
India is a manufacturing hub for cars, but car battery prices have fallen sharply in recent years.
In March, India’s chief minister, Narendra Modi, told a government conference that the government would make it easier to sell car batteries to other countries because the market was growing and the government could help reduce tariffs on car batteries.
But some analysts say India is not making the most of the government subsidy.
“I think it is really a subsidy for a small group of companies that has become very large over the last few years,” said Rajiv K. Verma, head of market research at IHS Automotive.
“They are not being as aggressive as they used to be.
But they are a small slice of the market.”
India has one of the highest carbon emissions in the world and has also been accused of using the subsidy to boost the cost and quality of the cars it sells.
In March, the government announced that all vehicles manufactured after 2020 would have to meet emissions standards set by the World Trade Organization.
It also announced a price cut for all new cars, with the price going up to 10 per cent.
“The subsidies that are offered to small players in the automotive sector are a waste of money.
The tax-free status of the car is the real prize,” said Arvind Raghunathan, a senior analyst at Capital Economics.
“These subsidies are a huge drag on growth.”