The Union Government has approved a scheme to promote manufacturing of electric vehicles in India and position the country as an EV manufacturing hub. The policy aims to attract investments in the EV space from global EV manufacturers. This move is expected to provide clarity to global EV majors such as Elon Musk-led Tesla, which have been mulling setting up a plant in the country, but wanted special sops.
This the government expects will provide Indian consumers with access to latest technology, boost the Make in India initiative, and strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment.
To be eligible for the policy an EV maker will need to meet the following requirements –
- Minimum Investment required Rs 4150 crore ($500 million)
- No limit on maximum investment
- Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e- vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
- Domestic value addition (DVA) during manufacturing: The OEM will need to meet 25 percent localisation by the 3rd year and 50 percent by the 5th year.
- The customs duty of 15 percent (as applicable to CKD units) would be applicable on vehicle of minimum CIF value of $35,000 (Rs 29 lakh) and above for a total period of 5 years subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
- The duty foregone on the total number of EV allowed for import would be limited to the investment made or Rs 6,484 crore (equal to incentive under PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of $800 million (Rs 6,664 crore) or more. The carryover of unutilised annual import limits would be permitted.
- The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone.
- The bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
