In a strategic move to bolster electric vehicle (EV) manufacturing, the Indian government has unveiled a new policy aimed at attracting global automakers. The policy offers significant import duty reductions for companies committing to local production, aligning with India’s broader goals of reducing emissions and fostering sustainable transportation.
Under the new scheme, automakers investing a minimum of ₹4,150 crore (approximately $500 million) in India can import up to 8,000 EVs annually at a reduced customs duty of 15%, down from the previous rates of 70% to 110%. This concession applies to vehicles with a minimum cost, insurance, and freight (CIF) value of $35,000 and is valid for five years. Companies are required to establish manufacturing facilities within three years and achieve 25% domestic value addition (DVA) by the third year, increasing to 50% by the fifth year.
The policy has garnered interest from several global automakers. Mercedes-Benz, Skoda-Volkswagen, Hyundai, and Kia have expressed intentions to set up manufacturing operations in India to capitalize on the incentives. However, Tesla has indicated a preference for establishing sales outlets without committing to local production, rendering it ineligible for the benefits under the new scheme.
Indian automakers, including Tata Motors and Mahindra & Mahindra, have raised concerns about the reduced import duties, fearing increased competition from global players. They argue that the policy could undermine domestic manufacturers who have already invested heavily in local EV production. Despite these concerns, the government maintains that the policy will enhance consumer access to advanced EV technology and promote healthy competition.
The policy also stipulates that companies must provide a bank guarantee equivalent to the total duty foregone or $790 million, whichever is higher, to ensure compliance with investment and localization commitments. Failure to meet these requirements could result in the withdrawal of duty concessions.
Analysts believe that the new policy will intensify competition in the Indian EV market, benefiting consumers through increased choices and potentially lower prices. Additionally, the emphasis on localization is expected to boost the domestic auto component industry, fostering technological innovation and job creation.
As India aims to increase the share of EVs in its automotive market from the current 2.5% to 30% by 2030, the new policy represents a significant step towards achieving this goal. By attracting global manufacturers and encouraging local production, India seeks to position itself as a major hub for electric mobility in the coming years.
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