In a landmark policy shift aimed at transforming India into a global hub for electric vehicle (EV) manufacturing, the Indian government has announced a revised EV policy that significantly reduces import duties on electric cars. This move is designed to attract top international manufacturers like Tesla, VinFast, and others to set up production facilities in the country, bringing in cutting-edge technology and substantial investment.
A Powerful Incentive for Local Manufacturing
The cornerstone of the new policy is a time-bound reduction in import duties for a limited number of EVs. The key features of the policy are:
- Reduced Import Duty: The import duty on EVs with a minimum CIF (Cost, Insurance, and Freight) value of $35,000 will be slashed to 15% for a period of five years. This is a dramatic reduction from the current rates of 70% to 100%.
- Cap on Imports: This concessional duty rate will be applicable to a maximum of 8,000 cars per year. If a company does not fully utilize its import quota in the first year, the unutilized portion can be carried over to the next year. The total number of EVs that can be imported under this scheme is capped at 40,000 over the five-year period.
- Mandatory Local Investment: To avail of these duty concessions, manufacturers must commit to a minimum investment of ₹4,150 crore (approximately $500 million) to set up a manufacturing facility in India. There is no upper limit on the total investment.
- Phased Domestic Value Addition: The policy mandates a phased increase in domestic value addition (DVA). Companies must achieve a DVA of 25% by the third year of their operations and increase it to 50% by the fifth year. This ensures that the policy not only attracts investment but also fosters the development of a local EV component ecosystem.
- Bank Guarantees: To ensure compliance, manufacturers will be required to provide a bank guarantee equivalent to the customs duty foregone. This guarantee will be invoked if the company fails to meet its investment and DVA commitments.
A Win-Win for the Indian EV Ecosystem
This policy is a strategic masterstroke that balances multiple objectives. By allowing limited imports at a lower duty, it gives global manufacturers a window to test the Indian market and build their brand presence. At the same time, the stringent investment and localization requirements ensure that this market access is directly tied to a long-term commitment to manufacturing in India.
The benefits of this policy are expected to be far-reaching:
- Infusion of Technology and Capital: The entry of global players will bring in advanced EV technology, modern manufacturing practices, and significant foreign direct investment.
- Development of a Local Supply Chain: The phased DVA mandate will compel manufacturers to source components locally, giving a major boost to Indian auto ancillary companies.
- Increased Consumer Choice: Indian consumers will have access to a wider range of high-quality, globally renowned electric vehicles.
- Job Creation: The setting up of new manufacturing plants will create a significant number of direct and indirect jobs.
A New Era for ‘Make in India’ in the EV Sector
The revised EV policy is a clear signal of the Indian government’s ambition to position the country as a global leader in electric mobility. It is a well-crafted policy that creates a compelling business case for international manufacturers to “Make in India.” By attracting the best in the world, India is not just looking to meet its own demand for clean transportation but is also aiming to become a major export hub for electric vehicles. This policy has the potential to be a game-changer, setting the stage for a new era of growth and innovation in the Indian automotive industry.
