In a bold effort to position itself as a global manufacturing hub for electric vehicles (EVs), India has launched a policy to foster domestic production by harnessing its manufacturing prowess to drive innovation, economic growth, and sustainable mobility solutions.
The newly approved policy aims to attract foreign EV manufacturers by offering enticing incentives, such as tax relief and reduced import taxes on select EVs.
The Ministry of Commerce & Industry unveiled this game-changing policy, designed to lure global investments in the EV sector. The guidelines and eligibility criteria outlined in the policy will enable manufacturers to avail benefits for importing electric cars into the Indian market. Once implemented, this scheme will provide Indian consumers with access to cutting-edge technology in the EV space.
To qualify for the benefits under this policy, EV manufacturers must commit to investing a minimum of Rs 4,150 crore within a three-year deadline, with the goal of initiating local manufacturing of electric vehicles. Notably, the government has not set an upper limit on the investment amount, allowing manufacturers to invest as per their strategic plans.
The policy permits EV makers to import a maximum of 8,000 electric vehicles into India annually. However, they must utilize at least 35% of components from local markets for car production. Additionally, these manufacturers are required to achieve a 50% Domestic Value Addition (DVA) within five years.
In exchange for meeting these requirements, the carmakers will benefit from a reduced import duty of 15% on electric vehicles priced at or below $35,000 (approximately ₹29 lakh). Currently, the Indian government imposes an import tax ranging from 70% to 100% on electric cars brought into the country.
To ensure compliance with the investment commitment, the policy mandates that companies provide a bank guarantee. If the DVA and minimum investment criteria specified in the scheme guidelines are not met, the bank guarantee will be invoked.
This policy has the potential to attract major global players in the EV market, including Elon Musk‘s Tesla. The US-based carmaker has been planning to enter the Indian market for the past couple of years but has faced challenges due to policy differences with the Indian government.
Industry Reaction
On the new EV Passenger Vehicle Manufacturing Scheme, Mr 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 & aspirational products and work towards developing a robust EV Eco system in the country.”
Mr. Sunjay Kapur, Chairman, Sona Comstar & Deputy Chair, CII Northern Region said, “The approval of the new E-Vehicle policy marks a pivotal moment in our nation’s mobility landscape. This progressive step not only solidifies India’s position as a manufacturing hub for EVs but also fosters a conducive environment for global players to invest in our burgeoning market.
With a minimum investment threshold and a clear roadmap for domestic value addition, this policy underscores the government’s commitment to nurturing a robust EV ecosystem. It heralds a new era of innovation and accessibility to cutting-edge technology and amplifies the ‘Make in India’ initiative. By incentivising local manufacturing and fostering healthy competition, this policy will not only accelerate the adoption of EVs but also bolster economic growth by way of reducing our reliance on imported crude oil and mitigating environmental impact, particularly in urban areas.
I congratulate the government and welcome this forward-thinking policy which propels India’s journey towards a greener and sustainable future.”
Shamsher Dewan, Senior Vice President and Group Head of Corporate Ratings at ICRA Limited expressed optimism about the policy’s impact, stating, “This move would help access global technologies, expand product range, and improve cost competitiveness, all of which would facilitate enhanced EV adoption. ICRA currently expects about 15% of new car sales to be electric by 2030.”
The Indian government has taken a proactive stance by introducing this policy, which aims to transform the country into an EV manufacturing powerhouse. By offering attractive incentives and a supportive regulatory framework, the policy creates an enabling environment for foreign EV manufacturers to establish their presence in India.
This move is expected to accelerate the adoption of electric vehicles, contribute to the growth of the domestic EV ecosystem, and position India as a global hub for EV manufacturing.
