Confusion over when benefits/subsidy under the new EV policy would start accruing has cast a shadow over Vietnamese EV-maker VinFast’s $2-billion investment at Thoothukudi in Tamil Nadu.

Sources privy to a meeting at Ministry of Heavy Industries (MHI) held on Thursday (April 18) told businessline that Pham Sanh Chau, VinFast India CEO, who attended the meeting of the stakeholders along with the top officials at MHI, “got confused” after learning that the investment that VinFast started in January, will not be considered under the new policy for the benefits.

“The CEO of VinFast, who attended the meeting from Hanoi via video link, got confused after learning from the MHI Secretary that any benefit/subsidy that a company seeks to get, will be applicable only once the policy is in place, and not from the date an OEM starts investment,” a source privy to the meeting told businessline. The meeting at MHI was chaired by Secretary, Kamran Rizvi and Additional Secretary, Hanif Qureshi with the stakeholders from the auto industry including companies such as Hyundai Motor India, Maruti Suzuki India, Mahindra & Mahindra, Tata Motors, Toyota Kirloskar Motor and VinFast.

Sources said in their meeting this January with the Commerce Minister Piyush Goyal, Vinfast leadership including its CEO got the distinct impression that the benefits would be applicable from the day a company starts its investment in India. VinFast’s CEO reportedly conveyed this during an April 18 meeting with MHI officials. He was informed by the MHI Secretary that the subsidy would only apply after the policy is implemented, not from the investment commencement date, according to sources.

Granular details

However, the senior officials at MHI have categorically told the VinFast CEO about the fact that benefits would not be applicable from the date an OEM starts investment. There are other points that have been clarified by the government. “I think there was some misunderstanding...VinFast had a misconception that they can invest $500 million by the fifth year. But the policy clearly mentions that you have to invest that by the third year. In the third year, you should have completed your $500 million investment and the vehicles should roll out of the plant with the 25 per cent domestic value addition (DVA),” an official said.

The policy very clearly mentions that if you don’t invest $500 million in first three years, then the bank guarantee will not be considered. Secondly, it was their understanding that the investment in Thoothukudi from January will be counted (from the day construction of the plant started), but the policy says it will be counted only after 240 days. The first 120 days (four months) is called application window then there is another 120 days for MHI to evaluate the proposal and confirm. After the confirmation letter comes from the Ministry then the investment cycle will begin, that means their investment cycle will begin only after eight months, the official explained.

Now that the granular details of the policy have been clarified to the company, there is a shadow over the company’s plans. The government is apprehensive that the company might delay their operations in India and halt the construction of their plant for the moment.

Queries sent to VinFast through e-mail did not elicit any response till the time of going to press.

VinFast and Tamil Nadu government had signed a Memorandum of Understanding (MoU) on January 6, where both parties agreed to invest $2 billion. The initial commitment for the first phase of the project, spanning five years from the commencement date, is set at $500 million.

The establishment of VinFast’s integrated electric vehicle facility in Tamil Nadu is expected to create 3,000-3,500 employment opportunities locally.

Earlier last month, the Centre had approved an EV policy that will allow companies that invest a minimum of ₹4,150 crore in the country, meeting domestic value-added conditions, to import a limited number of vehicles at reduced customs duties.

The policy is aimed at attracting major multinational companies such as Elon Musk’s Tesla and VinFast, promoting India as a manufacturing destination. Per the policy, it gives three years to the investor to set up manufacturing facilities in India, start commercial production, and reach 50 per cent domestic value addition (DVA) within 5 years at the maximum (25 per cent by the third year).