On Friday, the government unveiled a new electric vehicle (EV) policy that is anticipated to significantly accelerate Tesla’s plans to launch in India.
“India Implements New Policy to Boost Electric Vehicle Manufacturing and Reduce Import Taxes”
Under the new policy, import taxes on some electric vehicles will be lowered by the government for businesses that invest a minimum of Rs 4150 crore ($500 million) and establish a local manufacturing facility in the nation.
Companies are now required by the revised policy to invest a minimum of $500 million in India. They will have three years to set up local production plants for electric cars (EVs), with the requirement that at least twenty-five percent of the parts be purchased from within the country.
Companies that fit these requirements will be allowed to import up to 8,000 electric vehicles (EVs) per year, with import duties reduced to 15% for cars costing $35,000 or more. Depending on the car’s value, India charges import taxes on imports that range from 70% to 100%.
Govt brings in a new #EVPolicy to attract global EV players like #Tesla. Centre will cut #importduty from 100% to 15% for 8,000 fully built EVs per year, in return for a minimum investment commitment of Rs 4,150 crore & a commitment to make in India #PowerCorridors pic.twitter.com/2PQJib4lgG
— POWER CORRIDORS (@power_corridors) March 15, 2024
“Key Provisions and Incentives Under India’s Electric Vehicle Manufacturing Policy”
How much of a minimum investment is needed?
A minimum investment of Rs 4150 crore (USD 500 million) is required of interested companies. The maximum investment is unrestricted, though.
What is the production schedule?
In a maximum of five years, the manufacturing facilities in India should be operational within three years of the commencement of commercial e-vehicle production, with a goal of reaching fifty percent domestic value addition (DVA) by then.
How is Domestic Value Addition (DVA) determined during the manufacturing process?
The term “domestic value addition” (DVA) describes the proportion of locally produced parts used in manufacturing. Businesses need to localize at least 25% of their content by the third year and 50% by the fifth.
Are imported cars subject to any customs charges?
Yes, for a total of five years, a minimum CIF value of USD 35,000 and above would be subject to a 15% customs duty (as applicable to completely knocked down units), provided the manufacturer establishes manufacturing facilities in India within three years.
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What happens if a business chooses to import EVs rather than produce them domestically?
The amount of duty waived on the total amount of EVs that can be imported would be capped at the investment amount or Rs 6484 crore, which is the same as the PLI scheme incentive, whichever is lower. If the investment is $800 million or more, a maximum of 40,000 EVs at a rate of no more than 8,000 per year would be allowed. Annual import caps that are not used may be carried over.
