According to a government official, India’s recently unveiled electric vehicle (EV) policy, which includes import duty concessions for EV manufacturers under specified conditions, is poised to become a compelling magnet for investments. The official suggests that not only Tesla Inc. but also numerous other global companies within the sector are likely to be drawn to India’s burgeoning EV market. The policy’s incentives, including import duty waivers, are anticipated to create an environment conducive to significant investments from both established players like Tesla and emerging contenders in the EV industry.
The objective should encompass attracting all companies within the EV sector, not solely Tesla. Many others could potentially take advantage of such provisions. By implementing a Production-Linked Incentive (PLI) scheme alongside this EV policy, we can further incentivize global investments. This policy not only offers import duty concessions but also mandates localization,” emphasized the official.
Announced on March 15, the new policy extends import duty concessions to companies committing to invest a minimum of $500 million or approximately Rs 4,150 crore and establishing manufacturing facilities within India within three years, with at least 25 percent of components sourced locally.
Companies meeting these criteria will be eligible to import 8,000 EVs annually at a reduced duty of 15 percent for cars priced at $35,000 and above. India currently imposes taxes of 70 percent or 100 percent on imported cars based on their value.
This initiative is anticipated to bolster the prospects of Tesla’s entry into India. Discussions between the Indian government and the US-based electric car manufacturer have been ongoing, with reports indicating plans for Tesla to establish a manufacturing unit in India.
Indeed, Tesla had been advocating for tariff reductions to expedite its intentions of commencing manufacturing operations in India.
The newly introduced EV policy is expected to foster the integration of cutting-edge technology within the Make in India initiative. Furthermore, the import duty exemption on EVs is limited to either the annual PLI incentive (Rs 6,484 crore) or the investment amount by the entity, whichever is lower.
India has already taken significant strides to promote the adoption of EVs, including the implementation of PLI schemes for advanced chemistry cells, automobiles, and automobile components. Additionally, the goods and services tax on EVs has been reduced from 12 percent to 5 percent. These measures collectively aim to stimulate the growth and uptake of electric vehicles in the country.
When asked about the potential disparity in benefits between global companies and local EV manufacturers, the official acknowledged, “There remains a discrepancy in treatment between domestic manufacturers and global counterparts. Domestic manufacturers continue to face taxes at differing rates. While this primarily constitutes a reduction in basic customs duty, other taxes will remain applicable. However, there is certainly some concession provided.”
A report by Moneycontrol in November highlighted that while New Delhi actively courted global EV giants to establish local operations, the inclusion of a Make in India requirement in the proposed EV policy is expected to ensure that companies do not merely engage in assembly activities within the country.
Sources: moneycontrol.com