Tesla, EV peers may have to make it in India to secure policy sops: Sources

India is also banking on better incentives from states for EVs to woo the likes of Tesla Inc. to the 'Make in India' programme apart from the Centre's new electric vehicle policy,

Even as New Delhi looks to woo global giants such as Tesla Inc. to set up shop in the country, a Make in India requirement in the proposed EV policy will likely ensure companies don't just assemble in India, according to people familiar with the matter.

“The policy will be such that it will ensure that some amount of manufacturing happens in India; otherwise, it would discourage Make in India,” one of the persons said.

The Indian government is reportedly working on a new EV policy that would slash import taxes for companies that commit to some local manufacturing.

The policy being considered could allow automakers to import fully-built EVs into India at a reduced tax rate of as low as 15 percent, compared to the current 100 percent that applies to fully-built cars that cost above $40,000, and 70 percent for the rest.

The person cited above added that considering that the policy is for the entire sector and not just for one company, the Centre will ensure that local manufacturing gets a push.

The Union government may also allow Tesla to import parts from certain Chinese suppliers on a case-to-case basis, this person said, adding that even in the case of Apple, India had given preliminary clearances to some of the iPhone makers’ Chinese suppliers to form joint ventures with Indian companies to ramp up domestic manufacturing of smartphones.

The government has been working on providing various incentives for the EV industry to achieve India’s sustainability goal of bringing down carbon emissions, Prime Minister Narendra Modi told Moneycontrol back in September.

India has already taken steps to push for the adoption of EVs, including production-linked incentive (PLI) schemes to make advanced chemistry cells, automobiles, and automobile components. Even GST on EVs was reduced to 5 percent from 12 percent.

India is also banking on better incentives from states for EVs to woo the likes of Tesla Inc. to the 'Make in India' programme apart from the Centre's new electric vehicle policy, a person aware of the development said.

“Some states could offer more incentives at their level that could make it more attractive for the US carmaker to manufacture in India even if the company is not on board with the benefits offered by the Centre’s new EV policy alone,” this person said on condition of anonymity.

Soon after talks between India and Tesla began, several states expressed their interest in the carmaker picking their region to begin operations. Some, including Gujarat, Maharashtra and Karnataka, publicly pitched their states to the US carmaker to set up a factory.

Many states in India have their own EV policy as they look to cash in on the shift to climate-friendly vehicles. These state-level incentives are applicable over and above the ones offered by the central government. While Gujarat offers a subsidy of up to around Rs 20,000 for two-wheelers, Rs 50,000 for three-wheelers, and Rs 1.5 lakh for four-wheelers, Tamil Nadu’s package includes incentives like 100 percent reimbursement of gross state Goods and Services Tax (GST) on EVs made and sold within the state for 15 years.

According to a newspaper report in September, Gujarat has kept communication channels open with Tesla to support the carmaker’s plans in India. Another report on November 21 said that an announcement could come at the Vibrant Gujarat Global Summit in January on the company’s plans to set up a factory in the country. The states of Gujarat, Maharashtra, and Tamil Nadu are under consideration because they already have well-established ecosystems for EVs and exports, the report added.