India Frames New EV Policy To Attract The Likes Of Tesla
Under India's new EV policy, the government will reduce import duty on electric cars for companies that invest at least $500 million to make in India.
The central government has formulated a new EV policy that’s aimed at attracting the likes of Tesla Inc. to make and sell electric cars in India.
Global electric carmakers, which invest at least $500 million to set up local manufacturing operations, will enjoy a reduced customs duty of 15% on imports of their electric cars for five years, as against 70–100% at present, according to a government gazette.
The minimum CIF (cost, insurance and freight) of the electric car must not exceed $35,000. There is no upper limit on investment, but the facility has to go onstream in three years and achieve 50% localisation in five years.
“We invite global companies to come to India. I’m confident India will become a global hub for EV manufacturing and this will create jobs and improve trade,” Piyush Goyal, union minister of commerce and industry, said at a press conference after the new EV policy was unveiled. The move will benefit consumers who want cheap electric mobility and reduce the government’s oil import bill at the same time, he said.
India’s new EV policy is a big win for Tesla Inc., which had been lobbying with New Delhi on a favourable tax regime to sell in India. The Narendra Modi administration wasn’t keen until the company committed to local manufacturing—something the government believes will give a fillip to the domestic industry.
For context, the cheapest Tesla car sells for $38,990 in New York. India’s cheapest electric hatchback retails for $8,500 in New Delhi.
The new EV policy opens the doors for other global original equipment manufacturers to set up shop in the world’s third-largest automotive market.
In January of this year, Vietnam’s Vinfast Auto Ltd. broke ground to construct a $2 billion EV plant in Tamil Nadu with an annual production capacity of 150,000 units.
In February, Mahindra & Mahindra Ltd. and Germany’s Volkswagen AG signed a supply agreement for EV components as part of their partnership to push electric mobility.
The new EV policy for new entrants reinforces the ‘Make In India’ momentum, M&M told NDTV Profit on Friday.
“This (the new EV policy) will help accelerate the EV ecosystem in India,” a spokesperson for the Scorpio maker said in an emailed statement. “Our Born Electric SUVs are on track to be launched in January 2025 with cutting-edge technology. Our products will speak for themselves.”
When contacted, Tata Motors refused to comment on the matter.
But “the idea is to attract companies—not only Tesla, but many others—to come with this kind of facility," an official at the Directorate General of Foreign Trade told NDTV Profit on the condition of anonymity. “There will still be differential treatment vis-à-vis domestic (carmakers). They are still paying taxes at a differential rate.”
The incentive amount is a nudge to garner more global investments.
“So if you can do a PLI (production-linked incentive), you can also do this to attract global investment. This is also mandating localisation,” the official cited above said.
Only 8,000 electric cars are allowed to be imported annually for a period of five years. The import duty foregone is limited to the investment made by the company or close to $800 million (about Rs 6,484 crore)—the outlay of the auto PLI scheme.
Moreover, the investment commitment has to be backed up by a bank guarantee.
India’s new EV policy is a step in the right direction, for it would aid the localisation of EV components, according to Shamsher Dewan, senior vice president and group head of corporate ratings at ICRA Ltd.
“This scheme gives rise to manufacturing opportunities for domestic auto component suppliers. The EV component market is expected to be at least Rs 50,000 crore in terms of revenue potential for ancillaries,” he said.
The investments can also boost India’s switch to electric cars, which made up just 2.3% of the total passenger vehicles sold last year, according to BloombergNEF. But their numbers have nearly doubled year-on-year—83,305 so far this fiscal, as against 47,499 in FY23, according to data from a government portal that tracks EV adoption in India.
