In a bid to woo companies like Tesla to set up a manufacturing plant in India, the government on Friday announced reduced import duty of 15% for electric vehicles (EVs) imported as a completely built unit (CBU), from the present 70% to 100% applicable for vehicles imported in CBU form, provided the EV maker sets up a local commercial manufacturing unit within three years.
The reduced import duty would be offered if the EV manufacturer meets certain pre-conditions, including a minimum investment of ₹4,150 crore (or $500 million), starts a local manufacturing plant within three years and reaches at least 25% domestic value addition in that time. The auto manufacturer will also have to reach 50% domestic value addition within five years, the Ministry of Commerce and Industry said in a release.
The customs duty of 15% on completely built units would be applicable on cars priced at a minimum value of $35,000 (about ₹29 lakh) including cost, insurance and freight charges. The duty relief will be applicable for a total period of five years.
A maximum of 8,000 vehicles per year would be permitted to be imported under the policy and the EV firm would be allowed to carry over unutilised annual import limit.
In response to questions over concerns from domestic manufacturers, the DPIIT Secretary, Rajesh Kumar Singh said, that the government was offering “limited concession for a limited number of imports.” He explained that since the benefit was only for EVs priced above $35,000, the impact on Indian manufacturers would be minimal as only 1.5% of total passenger vehicle sales, or less than one lakh units, happen in that price range.
“Our intention is not to cannibalise their (domestic manufacturer’s) market, but to expand the electric vehicle market by bringing in new players with the latest technology and kickstart the transition while at the same time creating a competitive framework,” Mr. Singh asserted.
The senior official expressed the hope that the move would induce domestic players to raise their game as EV three wheelers had reached 15% of sales in the segment, and two wheelers had reached 10% whereas four wheeler numbers were still below 2%. “Plans of domestic manufacturers are fairly laid back and long term. We can’t keep waiting forever,” he said.
The government has been in talks with Tesla for the past few years to convince it to set up a manufacturing facility in India. Last November, during a visit to the U.S., Commerce Minister Piyush Goyal also visited Tesla’s manufacturing facility in Fremont, California. During the visit, Mr. Goyal announced that the company would be doubling its imports of auto components from India from $1 billion in 2022-2023 to $1.9 billion in the financial year 2023-2024.
Among early reactions from the automobile industry, car manufacturer Mahindra said: “The recently announced EV policy for new entrants reinforces the Make in India momentum, with requirements of bank guarantees, minimum investment commitment and local value addition. This will help accelerate the EV ecosystem in India.”
