By when can India indigenise electric vehicle production? | Explained Premium

The Hindu explores the Centre’s new policy which seeks to promote India as a manufacturing hub for electric vehicles, and paves the way for EV manufacturers like Tesla and Chinese automaker BYD to manufacture locally.

The story so far: The Union government on March 15 approved a policy to promote India as a manufacturing hub for electric vehicles (EVs). Broadly, the policy attempts to pave the way for global EV manufacturers to invest in India and to manufacture locally. “This will provide Indian consumers with access to latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players,” the government stated, adding that this move would lead to higher production, attaining economies of scale, and help reduce air pollution, among other things. The minimum investment cap has been set at ₹4,150 crores.  

The move attempts to combine two goals - localising production and an annual EV car sale of 30% by 2030.  

The policy broadly clears the path for global EV makers like Tesla and Chinese EV maker BYD to foray into the Indian markets. The central goal of this policy is to enable transitioning to localised production in a commercially viable manner and plan as per local market conditions and demand.   

The most significant provision is the reduction of import duty on electric vehicles imported as a completely built unit (CBU) with a minimum cost, insurance and freight (CIF) value of $35,000 to 15% from the present 70%-100%. Reuters had reported last August that lowering import taxes was among the major proposals made by Tesla. It had welcomed the Indian proposal to set up a facility but demanded lower import duties on electric cars. But the Indian government has been of the view that lowering duties might encourage import dependence, without leading to technology and production transfers. This deterred India from entertaining Tesla’s request for lower duties.

The current provision is India’s attempt to find a midway point where affordability for a captive market is prioritised, while recognising that import substitution is a protracted process requiring a layered approach. The current provision will be extended for five years subject to manufacturers setting up their facilities in India within three years. 

The policy also stipulates that a total duty of ₹6,484 crore or an amount proportional to the investment made — whichever is lower— would be waived on the total number of EVs imported. It must be noted that, a maximum of 40,000 EVs can be imported under the scheme at not more than 8,000 units a year, provided the minimum investment made is $800 million. Carryover of unused annual imports limits is permitted.  

Overall, the minimum investment cap for eligibility has been set at $500 million (approximately ₹4,150 crore).