Under the new policy, companies that invest at least $500 million (Rs 4,150 crore) and establish a manufacturing factory within three years will be eligible for lower import tariffs on select electric vehicles. For automobiles with a CIF (cost, insurance, and freight) value of $35,000 and higher, it wants to lower import tariffs for interested EV manufacturers to 15% from the existing 70% or 100% for a period of five years from the date the government issues the clearance letter.
Senior government officials involved in the program emphasized that the initiative would draw original equipment manufacturers (OEMs) from around the world as well as those already in the market who want to import their electric vehicle (EV) models that aren’t currently offered in India.
According to the official, “any entity, regardless of origin, can participate and seek incentives under the scheme, provided they commit to a minimum investment and follow the prescribed policy guidelines.”
As stated in the FDI policy revisions for 2022, enterprises in nations that share land borders with India are required to acquire additional approval from the government. India shares land borders with China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
Completely built-up (CBU) automobiles that cost more than $40,000 are now subject to a 100% tax. Items costing under $40,000 will have a 70% tax applied to them. Fully disassembled (CKD) units that need to be reassembled in the receiving nation are already subject to a 15% tariff.
Despite being meant for all OEMs, the policy was implemented in response to Tesla’s vocal demands for a duty cut. Business Standard revealed on December 18, 2023, that during Tesla’s conversations with government officials, the company suggested lowering the duty on CBUs to 15% and include charging infrastructure in the definition of investment.
A single OEM may be eligible for a maximum rebate of Rs 6,484 crore in customs duty, per the policy document.
An applicant company or its connected enterprise must have a minimum revenue threshold of Rs 10,000 crore from the automobile manufacturing industry in addition to a global investment commitment of Rs 3,000 crore in fixed assets in order to be eligible for the scheme, according to a notification by the MHI.
The policy draft notification stated that EV passenger cars (e-4W) can be imported at first with a minimum CIF value of $35,000 (Rs 29 lakh) at a duty rate of 15% for a period of five years from the date of issuance of the permission letter by the MHI.
This implies that a business can import 25,974 cars over the course of five years if it imports a car for $35,000 and makes the required minimum expenditure of $500 million. However, an official states that the corporation can import 40,582 cars if the investment amount is raised to $781 million or more. The annual limit for the number of EVs that can be imported is 8,000.
The government stated in a statement that a bank guarantee will be required to support the investment pledge in place of the waived custom charge.
Only 50% of the domestic value addition and an investment of at least Rs 4,150 crore—or the total duty foregone over a five-year period, whichever is higher—will result in the bank guarantee being reimbursed.
Within 120 days or more of this scheme’s announcement, applications will be requested. There will be an extension of at least 120 days for the Notice Inviting Applications to be submitted. During the first two years of the program, the MHI is still able to launch the application window as needed.
