In a major move to attract investments from reputed global companies, the Centre has 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 promoting India as a manufacturing destination.

“This will provide Indian consumers with access to the latest technology, boost the Make in India initiative, and strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, and lower cost of production,” according to a statement issued by the Commerce & Industry Ministry on Friday.

The policy 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), the statement noted.

The customs duty of 15 per cent (as applicable to CKD units) would be applicable to vehicles with a minimum CIF value of $35,000 for five years, subject to the manufacturer setting up facilities in India within a 3-year period. At present, vehicles below $40,000 attract customs duties of 70 per cent, while those above it attract 100 per cent.

‘Fine balance’

“The policy finely balances the interests of various state holders to ensure what is being done is in the public interest. We felt we should have reasonably stringent performance requirements on investments, where a minimum investment of $500 million has been insisted upon. Also, a fairly stringent domestic value addition system will ensure that local manufacturing ecosystems develop,” said DPIIT Secretary Rajesh Kumar Singh.

Without naming Tesla, which has long been in negotiations with the government on terms of investments, the Secretary said that there are multiple expressions of interest from foreign companies in investing in the EV space in India. “At least there are two. But there could be more,” he said.

Apart from Tesla, Vietnamese EV maker VinFast, too, is trying to quickly move into the EV space in India.

According to analysts, this is the beginning of a new era for the Indian EV market. “We will see new players like Tesla, new aspirational products, and new aspirational customers under this scheme. The size of the premium EV market may see new heights,” said a Delhi-based analyst.

“The duty foregone on the total number of EVs allowed for import would be limited to the investment made or ₹6,484 crore (equal to the incentive under the PLI scheme), whichever is lower. A maximum of 40,000 EVs, at a rate of not more than 8,000 per year, would be permissible if the investment was $800 million or more. The carryover of unutilised annual import limits would be permitted,” the statement explained.

The investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the customs duty forgone. The bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines

On the new EV passenger vehicle manufacturing scheme, Vinod Aggarwal, President, SIAM, said, “A holistic view has been taken by the Government of India in the best interests of the country. The Indian automobile industry and members of SIAM will adapt to this new policy and remain committed to bring new, innovative and aspirational products and work towards developing a robust EV eco system in the country.”

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