The Union government has approved a policy to promote India as a manufacturing hub for electric vehicles (EVs). The policy aims to attract global EV manufacturers to invest in India and manufacture locally. It includes a reduction in import duty on EVs imported as completely built units (CBUs) and sets localisation targets for manufacturers. The minimum investment cap for eligibility is set at ₹4,150 crores. Domestic players have expressed concerns about competition, while experts highlight challenges in the Indian EV market, including the need to scale up charging infrastructure. The policy aims to boost the Make in India initiative, strengthen the EV ecosystem, and reduce air pollution.
The policy allows global EV makers like Tesla and Chinese EV maker BYD to enter the Indian markets. The reduction of import duty on CBUs with a minimum value of $35,000 to 15% from the present 70%-100% is a significant provision. However, manufacturers must set up their facilities in India within three years to benefit from the provision, which will be extended for five years. The policy also waives duty on the total number of imported EVs, with a maximum limit of 40,000 units annually, subject to a minimum investment of $800 million.
The localisation targets require manufacturers to attain 25% domestic value addition in the third year of operation and 50% in the fifth year. Failure to achieve the targets may result in the invocation of bank guarantees. Domestic players, such as Tata Motors, have raised concerns about competition and the impact of lowered import duties on the domestic industry. However, experts suggest that the policy benefits global Original Equipment Manufacturers (OEMs) catering to the higher end of the market and facilitates technology transfer and supplier ecosystem upgrade for Indian manufacturers.
The Indian EV market is faced with challenges, including low-battery capacity, limited range, and a lack of charging infrastructure. Experts emphasize the need for global players to consider local factors like driving conditions and customer expectations. The government’s Production-linked Incentive (PLI) scheme is expected to strengthen the EV supply chain, but aggressive targets for EV penetration and scaling up charging infrastructure are crucial for wider adoption in India.
While it is still early to determine if the localisation targets will be met, experts view the policy as a lucrative scheme for global manufacturers. They believe it will drive accelerated understanding of the Indian market, stimulate the local EV ecosystem, and open significant opportunities for localization in various components.
