EV Policy
The policy broadly clears the path for global EV makers like Tesla and Chinese EV maker BYD to foray into the Indian markets.
The central goal of this policy is to enable transitioning to localised production in a commercially viable manner and plan as per local market conditions and demand.
The most significant provision is the reduction of import duty on electric vehicles imported as a Completely Built Unit (CBU) with a minimum cost, insurance and freight (CIF) value of $35,000 to 15% (for a five-year period) from the present 70%-100%.
This is provided the maker sets up a manufacturing unit within three years.
The policy also stipulates that a total duty of ₹6,484 crore or an amount proportional to the investment made — whichever is lower— would be waived on the total number of EVs imported.
It must be noted that, a maximum of 40,000 EVs can be imported under the scheme at not more than 8,000 units a year, provided the minimum investment made is $800 million.
Another important aspect of the scheme is localisation targets.
Manufacturers have three years to set up their manufacturing facilities in India.
They are expected to attain 25% localisation by the third year of incentivised operation and 50% by the fifth year.
Should the localisation targets not be achieved, and if the minimum investment criteria as defined under the scheme is not meet , the bank guarantees of the manufacturers would be revoked
Domestic Players
Tata Motors, in December 2023, had opposed the Tesla proposal.
It argued that lowering duties would hit the domestic industry and “the investment climate will get vitiated.”
According to Deloitte India, most Indian players are leading in the segments below ₹29 lakh as of now, and hence this policy benefit (from 15% import duty) will likely be for Original Equipment Manufacturers (OEMs) catering to consumers in the higher end of the market
The policy makes it lucrative for global EV players and Indian JVs with such players, to expand sales and manufacture in India.
Indian Market
Global players in India must consider local circumstances, like the environment, roads, and usage conditions
While penetration in the two-and three-wheeler segment has been significant, passenger vehicles have seen only a 2.2% contribution thus far
This is mainly due to lack of proper charging infrastructure, range anxiety, and limited number of products in the affordable range due to limited localisation
The Confederation of Indian Industry (CII) in a July 2023 report had observed that India may require at least 13 lakh charging stations by 2030 to support “aggressive EV uptake.
The associated EV ecosystem must be made capable of addressing reliability and durability of components and service support
Liberalisation and globalisation currents acquiring increased hold of the components’ manufacturing system altered its manufacturing priorities
Appropriate product and system designs in case of two wheelers and three wheelers and four wheelers will have to guide PLI.
Foreign capital would not easily meet this purpose.
Indian manufacturers should be directed to this
COMMENTS