India Finalizes EV Policy Offering Import Tax Cuts for Local Production
The Indian government has finalized a new electric vehicle (EV) policy aimed at attracting foreign investment and enhancing domestic manufacturing. The policy offers significant import duty reductions for automakers committing to local production, aligning with India’s goals to become a global EV manufacturing hub and increase EV adoption.
Key Features of the New EV Policy
- Reduced Import Duties: Automakers investing approximately ₹4,150 crore (around $486 million) in local EV manufacturing will benefit from a reduced import duty of 15% on a limited number of electric cars, down from the current 70% duty.
- Investment and Production Timeline: Eligible companies are required to establish manufacturing facilities and commence operations within three years of approval.
- Localization Requirements: Manufacturers must achieve a minimum of 25% local value addition by the third year and 50% by the fifth year of operations.
- Annual Import Cap: Under the concessional duty rate, companies can import up to 8,000 electric vehicles annually.
Industry Response
While the policy was initially crafted to entice companies like Tesla, the EV giant has indicated no immediate plans to manufacture in India, focusing instead on importing vehicles. Conversely, other global automakers such as Mercedes-Benz, Volkswagen, Hyundai, and Kia have expressed interest in establishing local production under the new scheme.
Domestic manufacturers, including Tata Motors and Mahindra & Mahindra, have raised concerns about the reduced import duties, arguing that it may disadvantage companies that have already invested heavily in local EV production.
Objectives and Outlook
The policy is a strategic move to enhance India’s EV ecosystem, aiming to increase the share of electric vehicles in total car sales from the current 2.5% to 30% by 2030. By encouraging local manufacturing, the government seeks to reduce dependency on imports, create employment opportunities, and promote sustainable transportation solutions.
Applications for the policy are expected to open soon, with the government inviting both domestic and international automakers to participate in this initiative to transform India’s automotive landscape.
