New Delhi: India’s latest electric vehicle policy, announced on Friday, offers a strategic incentive for foreign EV manufacturers like Tesla from the US and Vinfast from Vietnam to explore opportunities in India’s burgeoning electric car market.
In a significant move, the government has reduced import duties on electric vehicles, paving the way for foreign manufacturers to import up to 8,000 EVs annually priced at $35,000 or higher, at a reduced import duty of 15%, down from the previous 70%. To avail of these incentives, manufacturers must commit to investing at least $500 million in India over the next three years and initiate local manufacturing operations. The scheme aims to ensure a 50% domestic value addition (DVA) in the vehicles manufactured in India within five years.
The policy, administered by the Ministry of Heavy Industries (MHI), comes after previous reports suggesting plans for a policy tailored for EV makers entering India. Originally intended for vehicles in the $25,000-$35,000 price range, lobbying efforts by domestic OEMs Tata Motors and Mahindra & Mahindra prompted the government to raise the threshold to $35,000 and above, safeguarding their investments and competitiveness.
While Tesla had initially sought the duty reduction for its planned $25,000 EV, it’s anticipated to introduce its Model 3, priced close to $40,000 globally, in India. This marks a significant milestone in Tesla’s efforts to enter the Indian market, potentially leading to localized operations.
The government’s move is perceived as a delicate balancing act, positioning India as an attractive destination for foreign investment while safeguarding domestic industries, especially on the cusp of upcoming general elections. Notably, the scheme requires bank guarantees equivalent to the reduction in import duty, subject to meeting the specified criteria over five years.
Mahindra & Mahindra, in response, sees the policy as reinforcing the Make in India initiative, expressing confidence in accelerating India’s EV ecosystem. Similarly, Vinod Aggarwal, President of SIAM, welcomes the holistic approach taken by the government, fostering innovation and aspirational products in the Indian automobile industry.