The Central government today (on Thursday) announced the approval of a scheme aimed at promoting India as a manufacturing hub for electric vehicles (EVs) equipped with cutting-edge technology. The Ministry of Commerce & Industry stated that the policy aims to attract investments from renowned global EV manufacturers into the Indian e-vehicle sector.
Under the new policy, companies are required to invest a minimum of Rs 4,150 crore in India and have a three-year timeframe to establish local manufacturing facilities for EVs, with at least 25% of the components sourced domestically.
Companies meeting these criteria will be eligible to import 8,000 EVs annually at a reduced import duty of 15% for cars priced at $35,000 and above. In contrast, India imposes a tax of either 70% or 100% on imported cars based on their value.
This initiative is expected to facilitate access to advanced technology, bolster the EV ecosystem, and support the Make in India initiative, as per the government’s statement. The duty exemption for imported EVs is limited to the annual PLI incentive (Rs 6,484 crore) or the entity’s investment, whichever is lower.
The policy includes the following: –
– Minimum investment required: Companies must invest at least Rs 4,150 crore, with no upper limit on the maximum investment.
– Manufacturing timeline: Companies have three years to establish manufacturing facilities in India, commence commercial production of e-vehicles, and achieve a maximum of 50% domestic value addition (DVA) within five years.
– Domestic value addition (DVA) targets: Companies are expected to achieve a localisation level of 25% by the third year and 50% by the fifth year of manufacturing.
– Customs duty: A 15% customs duty (applicable to Completely Knocked Down units) will be imposed on vehicles with a minimum CIF value of USD 35,000 and above for a total duration of five years, provided the manufacturer sets up manufacturing facilities in India within three years.
– Duty foregone and import limits: The duty foregone on the total number of EVs allowed for import will be limited to the investment made or Rs 6,484 crore (equivalent to the incentive under the PLI scheme), whichever is lower. A maximum of 40,000 EVs, not exceeding 8,000 per year, will be allowed if the investment is $800 million or more. Carryover of unutilized annual import limits will be permitted.
– Bank guarantee requirement: Companies must provide a bank guarantee to support their investment commitment and the duty foregone. This guarantee will be invoked in case of non-fulfillment of DVA and minimum investment criteria outlined in the scheme guidelines.
