To woo major international players like Tesla, the Government of India on Friday, March 15th, 2024, gave the green light to an electric vehicle (EV) policy. The policy aims to encourage the establishment of manufacturing units for EVs within the country.
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Attracting Investment with Favorable Terms
According to the newly approved EV policy, the companies willing to invest the minimum amount of INR 4150 Cr in setting up EV manufacturing plants will be granted certain privileges, including reduced customs duties on imported vehicles. This move is expected to encourage global automotive giants to consider India as a viable market for their EV ventures.
Incentives to Boost Localization
Companies setting up manufacturing facilities in India will have 3 years to start operations and will have to achieve a localization level of 50% within 5 years. Notably, there is no upper limit on the investment amount, allowing companies to scale up their operations according to market demand.
Reduced Customs Duties for Importing EVs
One of the key incentives outlined in the EV policy is the reduction of customs duty on imported electric vehicles. Companies can import Completely Knocked Down (CKD) units at a reduced rate of 15% for 5 years, provided the vehicles meet certain criteria including a minimum CIF value of USD 35,000. The major cut of 70% or 100% customs duty depending upon the vehicle ‘s value, is predicted to open the market for US Electric Car major Tesla in India.
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Strict Monitoring and Accountability Measures
To ensure compliance with investment commitments, companies will be required to furnish a bank guarantee (BG) instead of relying solely on customs duty waivers. This measure aims to safeguard against any potential discrepancies in meeting the prescribed investment and localization targets outlined in the policy.
Limitations on Import Volume
The EV policy imposes restrictions on the number of EVs that can be imported annually, based on either the total duty foregone or the investment made, capped at INR 6,484 Cr. Import of not more than 8,000 EVs per year will be permitted under this scheme, with provisions for carrying over unutilized import limits.
