India is welcoming global EV (Electric Vehicle) makers like Tesla, VinFast, BYD, Kia, Škoda, BMW and Mercedes-Benz with open arms. The country’s Ministry of Heavy Industries (MHI) released a new policy for the promotion of EVs manufacturing at home.
Lower Import Taxes for Big Investments
The shining point of this new policy is a significant reduction in import taxes for EV producers willing to establish major joint ventures with Indian companies. Companies spending at least $500 million in local manufacturing within three years can import EVs at just 15% duty only for five years.
Such duty structure exactly matches the expectations of the Tesla CEO, Elon Musk in the governmental discussions on the plan to enter the Indian automotive market.
A Lucrative Opportunity for All Global Players
According to senior government officers, this incentive policy goes for Tesla also. This is an open invitation for every international automaker origin, regardless of their country as long as they meet the minimum investment of $500 million and are able to achieve 50% localization in the first five years of being operational.
Nevertheless, companies located in countries whose borders are shared with India such as China, their obtaining of additional governmental clearances like the 2022 amendments of India’s FDI Policy is necessary.
Existing Import Duty Rates for EVs
At present, fully imported EVs (Completely Built Units or CBUs) priced above $40,000 are taxed with the rate of 100% import duty followed by those below $40,000 taxed with 70% rate. In opposition, semi-knocked-down EV kits (CKDs) that necessitate local assembly already experience a 15% import duty.
Substantial Duty Savings for Manufacturers
Image source- BUSINESS STANDARD
The benefits of this new program are crucial. One OEM could be saving up to Rs 6,484 crore ($800 million) in customs duties just by adding a temporary 15% rate valid for 5 years.
This, however, is directly linked to the level of investment by the automaker, as more contributions allow more to be imported for the duration of the five-year period. The maximum number of EVs allowed to be imported through this scheme is 8,000 units per year per OEM.
As per documentation, importing 26,000 electric vehicles over five years at the concessionary rate of 15% is possible with a $500 million investment. The ceiling on imported EVs rises to more than 40,500 if the investment is increased to 781 million or more.
Safeguards and Investment Guarantees
Manufacturers’ commitments must be supported up with a guarantee equal to the customs duty waived following the policy. This bank guarantee will only be payable once the OEM achieves 50% domestic value addition and invests at least Rs. 4150 crore ($500 million+), whichever is higher.
The MHI will start to welcome applications for this scheme within 120 days of the notification and may or may not re-open the window after the first two years have passed.
Fostering an EV Manufacturing Hub
A senior official revealed that the central objective is to turn India into a global EV manufacturing center by getting new players like Tesla, and existing OEMs that are willing to import EV models that are not yet available in the country.
By providing attractive incentives that are subject to meaningful local investments India is seemingly overcoming the import duty hurdle that foreign automobile companies could never overcome in its fast developing automotive market. Now, the baton has been passed onto players like Tesla to exploit this chance and set their India’s inning on track.
Conclusion
India’s new EV supplier incentive scheme is seen as a strategic step which intends to position the country as a globally competitive EV manufacturing hub. To address one of the most significant challenges to investment in the country’s auto industry which previously discouraged many automakers, the government has been able to do this by offering substantial tax concessions to committed investments.
India is displaying its commitment to the creation of a heterogeneous and expansive electric vehicles system within its boundaries through its impartial policy, which is open to any company from any corner of the world. From the automotive leaders such as Tesla to the new starters, the incentives without import bans and stepwise moving to local production could lead to the rapid penetration of the EV technologies and knowledge.
The success of this initiative crucially depends on the effective implementation of the measures described above as well as the flexibility of foreign vehicle manufacturers. Nevertheless, should the leading EV brands take on the challenge, the dream of making India the next major EV manufacturing hub could rapidly gain shape and reverberation beyond its territory.
FAQs
Q1. What incentives is India offering to global EV manufacturers?
A. India intends to drop the import duty rate to 15% from 70-100% for electric vehicles above $35,000 in value for companies that choose to invest at least $500 million in local manufacturing within 3 years.
Q2. Which EV companies is this scheme aimed at attracting?
A. This program offers access to all world leading OEMs like Tesla, VinFast, BYD, Kia, Škoda, BMW, Mercedes-Benz and other manufacturers that currently don’t offer EV models in the Indian market.
Q3. What are the key conditions for availing these incentives?
A. Companies should support this $500 million investment fund with a bank guarantee, invest in local manufacturing within 3 years, and achieve 50% localization by the fifth year.
Q4. What is the objective behind this EV incentive policy?
A. The goal is to promote India as the world’s EV production base by creating a conducive environment for new investors like Tesla and existing automakers to build assembly plants in India.
Amit Gupta is an extreme environmental enthusiast and a passionate EV blogger who completed his B.Tech in Computer Science. He explores the emerging environmental technologies and discoveries in EV sector, sharing his valuable insights and tips on his blog which are based on his personal experiences. Through his articles, Amit Gupta aims to simplify the complex EV sector concepts and empowers his readers to make accurate decisions in our rapidly changing world. Follow him on Facebook and linkedin to stay updated on his latest posts.