New EV policy defines minimum investment at Rs 4,150 crore, customs duty lowered for limited import

Govt approves electric vehicle policy, minimum investment of Rs 4,150 cr required

Centre on March 15 announced that a scheme has been approved to promote India as a manufacturing destination so that electric vehicles (EV) with the latest technology can be manufactured in the country. "The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers," said Ministry of Commerce & Industry in a statement.

The new policy mandates companies to invest a minimum of Rs 4,150 crore in the country and will allow them three years to set up local manufacturing for EVs with at least 25% of the components sourced locally, potentially bolstering Tesla's market entry plans..

Companies that meet these requirements will be allowed to import 8,000 EVs a year at a lower import duty of 15% on cars costing $35,000 and above. India levies a tax of 70% or 100% on imported cars depending on their value.

The move is expected to provide access to latest technology and enhance the EV ecosystem and support the Make in India initiative, the statement issued by the government said. The duty waiver on EVs, which can be imported is capped at the annual PLI incentive (Rs 6,484 crore) or the investment made by the entity, whichever will be lower.

Sunjay Kapur, Chairman, Sona Comstar & Deputy Chair, CII Northern Region said, "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."

Uday Narang, Founder, Omega Seiki Mobility welcomed the policy initiative and said, "the provision for limited imports of EVs at reduced custom duty rates, incentivizing companies to invest in local manufacturing, is a strategic move to balance domestic production with international competitiveness."

Ayush Lohia, the CEO of Lohia Auto said, "The scheme is expected to drive increased demand for three wheelers and two wheelers. This surge in demand not only benefits our business but also encourages us to innovate and improve our products to meet the growing market needs."

A spokesperson from Mahindra commented that the new EV policy for newcomers strengthens the Make in India initiative and this is expected to hasten the development of the EV ecosystem in the country. Mahindra spokesperson's statement says: "The recently announced EV policy for new entrants reinforces the Make in India momentum, with requirements of bank guarantees, minimum investment commitment, and local value addition. This will help accelerate the EV ecosystem in India. Our Born Electric SUVs are on track to be launched in Jan 2025 with cutting-edge technology. Our products will speak for themselves.”

Here's a quick summary of what the policy entails: -

• Minimum investment required: Rs 4,150 crore with no limit on maximum Investment.
• Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e- vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
• Domestic value addition (DVA) during manufacturing: A localisation level of 25% by the 3rd year and 50% by the 5th year will have to be achieved.
• The customs duty of 15% (as applicable to CKD units) would be applicable on vehicle of minimum CIF value of USD 35,000 and above for a total period of 5 years subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
• The duty foregone on the total number of EV allowed for import would be limited to the investment made or Rs 6,484 crore (equal to incentive under PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of $800 million or more. The carryover of unutilised annual import limits would be permitted.
• The investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone.
• The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.