The Union Government has approved a Electric Vehicles policy for India. The scheme aims to promote India as a manufacturing destination, so that e-vehicles (EV) with the latest technology can be manufactured in the country. The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers. The policy is conducive for foreign EV makers like Tesla to enter the Indian market.
Also read: How Emerging Markets Like India Are Electrifying The Future Of Mobility?
The new EV Policy will provide Indian consumers with access to latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, and lower cost of production.
Further, it will also reduce imports of crude Oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment.
New EV Policy of India
Investment amount: Under the policy, the minimum investment required is Rs 4150 Cr (∼USD 500 Million), with no limit on maximum investment.
Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of electric vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
Domestic value addition (DVA) during manufacturing: A localization level of 25% by the 3rd year and 50% by the 5th year will have to be achieved.
Consumer Incentives & Budget Relations: Economics of Electric Vehicles Affordability
Custom Duty: The customs duty of 15% (as applicable to CKD units) would be applicable on vehicle of minimum CIF value of USD 35,000 and above for a total period of 5 years subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
The duty foregone on the total number of EV allowed for import would be limited to the investment made or ₹6484 Cr (equal to incentive under PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of USD 800 Mn or more.
The carryover of unutilized annual import limits would be permitted. The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone. The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
Tesla Entry To India
The new Electric Vehicle policy is conducive for EV makers like Tesla, that has long being eyeing the India market. Elon Musk announced India entry multiple times, but backed out citing high import duties. he even requested the govt to give benefits.
However, Nitin Gadkari, Union Minister of Road Transport and Highways clarified that he won’t allow any company to manufacture in China and avail benefits in India.
This policy now offers a facility to Tesla and other EV makers to setup a manufactuting unit with minimum investment of USD 500 million to avail lower import duties on limited vehicles.