NEW DELHI: In a bid to attract US-based electric carmaker Tesla and other global automakers to start manufacturing EVs in India, the central government has made big changes in its electric vehicle (EV) policy.
The government will now allow the import of completely built-up (CBU) electric cars that have a minimum cost, insurance and freight (CIF) value of $35,000 at 15% import duty for a period of 5 years. At present, CBU vehicles priced at more than $40,000 attract a 100% duty while those below $40,000 are subject to 70% tax.
This benefit is applicable for companies who are committing a minimum investment of Rs 4,150 crore or $500 million, to manufacture in India. The firms will have to meet other requirements such as increasing rate of localisation to 25% in 3 years and 50 % within 5 years.
“The manufacturing facility(ies) would have to start operation within a period of three years from the date of issuance of approval letter by MHI (Ministry of Heavy industries) and achieve minimum DVA (domestic value addition) of 25% within the same period. They are required to achieve minimum DVA of 50% within a period of 5 years,” as per a gazette notification issued by the government on Friday.
The firms will be allowed to import a maximum of 40,000 EVs at a rate of 8,000 cars a year at 15% import tax. “The duty foregone on total number of EVs allowed for import would be limited to the investment made or Rs 6,484 crore (equal to incentive under PLI scheme) whichever is lower,” the government said.
The changes in import duty comes as India is pushing hard to increasing adaption of EVs to cut import of crude oil and meet its carbon reduction target. Currently, shares of EVs in India is about 2% of passenger vehicle sales as higher prices and lack of charging infrastructure remains a big concern among car buyers.
The changes in duty regime may prompt Elon Musk’s Tesla to enter Indian market as the carmaker has been lobbying hard to seek import duty cuts for imported EVs. Musk had previously said a Tesla factory to produce cars in India is “quite likely” if they can first begin sales with imported vehicles.
“This will provide Indian consumers with access to latest technology, boost Make in India initiative, strengthen EV ecosystem by promoting healthy competition among EV players, leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, cut air pollution, and will have a positive impact on health and environment,” the government said.