No change in new EV policy, despite global carmakers’ tepid response: MHI official

As per the policy, the manufacturing facilities will have to be made operational within a period of 3 years from the date of the issuance of the approval letter by the Ministry of Heavy Industries

The government is unlikely to make any revisions to its new Electric Vehicle (EV) policy, which was announced earlier this year, amid lack of interest among global carmakers, including Tesla, for the growing Indian market.

An official from the Ministry of Heavy Industries (MHI) told Moneycontrol that the eligibility criterion and other conditions would remain the same for carmakers who intend to leverage the existing EV policy.

“Our stand is clear. You can import cars at reduced duties provided you make fresh investments (of $500 million) for an EV manufacturing plant in India,” said the official.

In March, the government had announced the policy in a bid to attract major global players such as Tesla. The new policy allowed them to import a limited number of cars at a lower duty of 15 per cent for vehicles that cost $35,000 and above for a period of five years from the date of issuance of the approval letter.

Under the policy, the approved applicants will have to set up manufacturing facilities in India with a minimum investment of $500 million for the manufacturing of e-4W (electric four-wheelers) and also provide a bank guarantee.

“We aren't concerned if Tesla or any carmaker has not applied for this policy. We won't revise the EV policy to suit any particular firm," the official added. However, he clarified that the ministry is in talks with carmakers to make the policy industry-friendly.

The policy stipulates that the manufacturing facilities will have to be made operational within a period of three years from the date of the issuance of the approval letter by the MHI and initially achieve a minimum DVA (domestic value addition) of 25 percent within the same period. Later, the DVA has to be increased to 50 percent within five years.

The companies will be allowed to import completely built-up unit (CBU) vehicles of e-4W manufactured by them at a reduced customs duty of 15 per cent, subject to certain conditions. The maximum number of e-4W allowed to be imported at the reduced duty rate will be capped at 8,000 units per year. The carryover of unutilised annual import limits will also be permitted, as per the policy.

Some media reports have suggested that the government is planning to make some changes in its EV policy to extend incentives for those automakers who have made investments in the country. The reports claimed that the government may consider incentives for carmakers who have set up manufacturing plants for internal combustion electric vehicles (ICEVs), hybrids and EVs.

While US electric carmaker Tesla Inc is yet to make any firm commitment on building a factory in India, other players such as Mercedes-Benz, BMW, Jaguar Land Rover, etc., which are selling ICEVs in the country, have also not leveraged on this policy yet. Chinese carmaker, BYD, too, has decided not to seek benefits from this policy.