The Ministry of Heavy Industries (MHI) has announced a bold new policy aimed at bolstering electric vehicle (EV) manufacturing in India, with a specific focus on attracting renowned global players like Tesla, VinFast, BYD, Kia, Škoda, BMW, and Mercedes-Benz. Under this policy, companies committing to a minimum investment of $500 million (Rs 4,150 crore) and establishing a manufacturing plant within three years will benefit from lower import taxes on select electric vehicles.
The proposed policy seeks to slash import duties for interested EV manufacturers to 15 percent from the current rates of 70 percent or 100 percent. This reduction applies to vehicles with a CIF (cost, insurance, and freight) value of $35,000 and above for five years from the issuance of the government’s approval letter.
These policy adjustments are aligned with the requests made by Elon Musk-led Tesla during its discussions with the Indian government. The aim is to not only incentivize global original equipment manufacturers (OEMs) but also encourage existing players to introduce EV models that are currently unavailable in India.
While the policy welcomes participation from international entities, including those from China, it emphasizes the importance of establishing local manufacturing facilities and achieving a 50 percent localization level within the first five years of operations in India.
However, companies based in countries sharing land borders with India must obtain additional government permission, as stipulated in the 2022 amendments to the FDI policy. Notably, these countries include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
Crucially, the policy draft stipulates that an Original Equipment Manufacturer (OEM) could potentially benefit from a significant waiver of up to Rs 6,484 crore in customs duty. However, to qualify for this scheme, applicants must meet rigorous criteria, which include achieving a minimum revenue threshold of Rs 10,000 crore from automotive manufacturing and making a substantial global investment commitment of Rs 3,000 crore in fixed assets.
Under this scheme, EV passenger cars (e-4W) can be imported initially with a minimum CIF value of $35,000 (Rs 29 lakh), subject to a duty rate of 15 percent for five years. The maximum number of EVs allowed to be imported is capped at 8,000 units per year.
Additionally, the investment commitment must be backed by a bank guarantee equivalent to the customs duty foregone. This guarantee will only be refunded upon achieving a 50 percent domestic value addition and making an investment of at least Rs 4,150 crore over five years.
The application process for the scheme will be open for 120 days or more from the scheme’s notification date, with the MHI retaining the authority to extend the application window as needed within the initial two years.
Source: Business Standard