Earlier in March last year, the Government of India was seriously considering slashing tariff duties for fully imported electric vehicles (EV) from 110 percent to 15 percent. This comes shortly after Prime Minister Narendra Modi’s recent visit to the United States of America where he interacted with President Donald Trump and Elon Musk, CEO and Founder of Tesla.
Trump is currency engaged in a trade war imposing heavy retaliatory tariffs on every import item. Since these radical announcements from the Trump administration, the auto industry is going through turbulence. According to The Economic Times, the Indian government is set to revise its EV policy.
As per the report, the new policy may mandate turnover of Rs 2,500 crore by the second year of operations. Under the proposed framework, import tariffs on premium EVs priced over US $35,000 will be lowered from 110% to 15%, contingent on manufacturers achieving designated investment and production targets. The report further reveals that the policy is awaiting approval from Heavy Industries Minister H.D. Kumaraswamy.
An official notification from the government is expected in the next couple of weeks after which the application window will be opened.
Requirements of investment & turnover
To benefit from the reduced import duty, the Government of India will also impose certain conditions that need to be fulfilled. For starters, an EV manufacturer will need to invest a minimum of Rs. 4150 crores (approximately $500 million) in India which should exclude any previous investments and costs related to land and infrastructure.
Further, manufacturers will be required to achieve a turnover of Rs. 2500 crores by the second year, increasing progressively to Rs. 5000 crores by the fourth year and Rs. 7500 crores by the fifth year. To top it off, applicants must establish operational manufacturing facilities within three years and achieve 25% domestic value addition initially, increasing to 50% within five years of ministry approval.
If these criteria are satisfied, foreign EV brands will be allowed to import 8,000 premium electric cars, priced above US $35,000 (approx Rs 30 lakh) with the reduced tariff structure. If everything falls into place, approval letters could be issued by July-August, allowing imports to begin soon after. An automaker will have 120 days to apply, once the policy is officially implemented.
Will Tesla benefit from this policy?
It is no secret that Tesla has identified India as a potential consumer market, but company CEO Musk has his reservations about setting up a manufacturing facility. In order to avail benefits from the prospective new EV policy, Musk and Tesla need to commit to the Indian government of setting up a manufacturing facility within three years of the company setting foot in India.
As of now, Tesla seems reluctant to the idea of setting up a production facility on Indian soil. Moreover, a couple of days ago, Trump expressed his disappointment on the possibility of Tesla establishing a facility in India and called it “unfair”. In a recent interview to Reuters, Trump was quoted saying, “”Now, if he built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair,”.
Source: The Economic Times