EV policy likely to attract Tesla, BYD, VinFast and global OEMs, claim industry analysts

Auto analysts reckon that the lower import tax of 15 percent on electric vehicles priced at $35,000 and above is a clear incentive for companies like Tesla to invest in local manufacturing

At a time when automakers like Mahindra and Mahindra (M&M), Tata Motors, Hyundai Motor India Limited (HMIL), and MG Motor India (partly owned by JSW Group) are boosting its electric vehicle (EV) production in the country, the new policy for battery-driven passenger cars is expected to give a fillip to foreign original equipment manufacturers (OEMs) like Tesla, BYD, VinFast Auto, Fisker, etc., according to industry analysts.

The Union government, on March 15, approved an e-vehicle policy, which entails a minimum investment of Rs 4,150 crore, along with three-year timeframe for starting commercial production.

Furthermore, a localisation level of 25 percent by the third year and 50 percent by the fifth year of foray into India is mandatory in order to avail the lower custom duty of 15 percent on Completely Built Units  (CBUs).

It would be applicable on cars priced at a minimum value of $35,000 (around Rs 29 lakh), including cost, insurance and freight charges.

Auto industry analysts reckon that the move would also enable the Indian automotive industry to access global technologies, expand product range, and improve cost competitiveness, which would facilitate enhanced EV adoption, as per auto research analysts.

Gates open for Tesla

While Tesla’s global spokesperson could not be immediately contacted for comments, auto industry analysts reckon that the new policy is a significant development for the EV market and will bring in foreign investment, boost domestic manufacturing, and offer consumers a wider range of EV options.

As Ravi Bhatia, Managing Director from automotive data intelligence firm JATO Dynamics India puts it: “The lower import tax of 15 percent on EVs priced at $35,000 and above is a clear incentive for companies like Tesla to invest in local manufacturing. This will likely lead to more competition in the market, ultimately benefiting consumers with a wider range of choices and potentially lower prices.”

Moneycontrol, on November 8, 2023, had broken the report that Tesla will be importing its electric cars from Europe in the first phase.

It was also exclusively reported by Moneycontrol later that the US EV maker intends to make its most affordable car-Model 2- in Germany and India for global markets.

According to Bhatia, the $35,000-threshold effectively creates a “buffer” for domestically produced EVs from established Indian OEMs. According to S&P Global Mobility, this will open up the Indian auto market to new carmakers (such as Tesla), suppliers, technologies and the overall EV ecosystem.

"Multiple carmakers, which are sitting on the fence, would now like to enter India. Indian consumers would have the choice of global technologies and products on Indian roads," stated Gaurav Vangaal, associate director at S&P Global Mobility.

IPO-bound Omega Seiki Mobility (OSM), which aims to be the largest domestic EV maker in country, affirmed that this initiative marks a “significant stride” towards fostering international alliances and attracting “renowned global enterprises” to India's automotive sector, catalysing substantial advancements in passenger vehicle development.

“Embracing entities like Tesla and VinFast, and others, underscore our ambition to position India as a pivotal automotive hub, serving not just the domestic market but also global export destinations,” Uday Narang, Founder and Chairman, Omega Seiki Mobility, said.

“This endeavour is poised to attract both direct and domestic investments, thereby fortifying India's position not only locally but on the global stage," he said.

Auto industry also welcomes move

According to auto industry body Society of Indian Automobile Manufacturers (SIAM), a “ holistic view” has been taken by the government  in the best interests of the country.

Vinod Aggarwal, President, SIAM said, “The Indian automobile industry and members of SIAM will adapt to this new policy and remain committed to bring new, innovative and aspirational products and work towards developing a robust EV ecosystem in the country."

While Tata Motors, MG Motor India and Hyundai India could not be immediately contacted for comments, an M&M spokesperson stated that the EV policy for new entrants reinforces the Make-in-India momentum, with requirements of bank guarantees, minimum investment commitment, and local value addition.