While India’s electric vehicle (EV) policy is widely expected to attract global players into this sector, including Elon Musk’s Tesla Inc., Chinese companies may not be able to enjoy the concessions under the policy.
India's policy offers a concessional rate of duty of 15 percent, subject to certain riders like a minimum investment of Rs 4,150 crore.
But Chinese and China-linked companies are likely to be out of the picture, given that New Delhi is still wary of foreign direct investments (FDIs) linked to Beijing, due to national security concerns, a senior government official told Moneycontrol .
“The concessional import duty policy is linked to actual investments in that sense. BYD does not come into the picture because it will not be able to provide FDI commitment that this EV policy needs. Because FDI will require clearances, BYD is, in the sense, out. Meaning, if it has to come, it will have to pay the existing duty of 70 and 100 percent,” this official said.
The EV policy mandates a minimum investment as well as a timeline of three years for setting up manufacturing facilities in India to start commercial production of e-vehicles to qualify for the lower import duty rate of 15 percent.
What India's FDI policy says about China
In order to curb opportunistic takeovers or acquisitions of Indian companies, the Centre amended the FDI policy, specifically Press Note 3, April 2020.
Under the new rule, an entity of a country, sharing land border with India or where the beneficial owner of an investment in India is situated in or is a citizen of any such country, can invest only under the government route.
The amended rules under Press Note 3 came into force from April 22, 2020.
Any investment proposal from Chinese or land-border nations will face a detailed scrutiny, and can come in only through the government route as per the rules laid down in Press Note 3, the official added.
Un-plugging China
India’s reluctance over granting concessions to Chinese EV makers via its newly unveiled policy is significant, given that Beijing is one of the strongest players in the sector.
China is a key leader in the global EV market in production, sales as well as exports. As per International Energy Agency (IEA), Beijing is the largest producer of electric vehicles and also a leading exporter of electric cars, representing over 35 percent of outbound shipments in 2022.
In 2022, China led the world in the sale of electric cars, accounting for around 60 percent of global purchases. More than half of the electric cars on roads worldwide are now in China. The country has already exceeded its 2025 target for the sale of new energy vehicle , according to a report by IEA.
Even more recently, Beijing continued to dominate the EV market.
Global EV sales rose to 1.23 million units in March 2024 with purchases in China rising 27 percent, followed by the US (15 percent), a Reuters report said on April 12, citing research firm Rho Motion.
On whether India would lose out by not extending the benefits of its EV policy to such a major player in the sector, the official said that the country made a choice.
“India does allow imports of Chinese BYD vehicles, but the country does not want their investment. As of now, this pushes out of the picture any Chinese EV makers through the EV policy route,” the official said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
