Government Set to Finalize New EV Policy Rules, Aiming to Boost Local Manufacturing

The Indian government is preparing to notify the rules for its new electric vehicle (EV) policy in the coming weeks. The policy aims to attract global automakers, including Tesla, by offering lower import duties on high-end EVs. However, the government is also introducing stricter conditions for companies to avail of these benefits, particularly focusing on domestic manufacturing and turnover growth.

Key Conditions for EV Manufacturers

One of the key stipulations in the policy is that companies applying for benefits under the scheme must meet a minimum turnover of Rs 2,500 crore in their second year of operation. This requirement is part of the effort to encourage long-term investment and commitment from companies entering the EV market.

Additionally, the policy is expected to allow companies to set up assembly lines within their existing facilities, provided they meet the investment criteria. The government has also made it clear that past investments will not be considered when calculating the required Rs 4,150 crore (about $500 million) investment needed to qualify for the scheme. Notably, costs related to land and buildings will not be counted as part of this investment.

Subsidized Import Duty and Local Manufacturing Requirements

The new rules also offer significant incentives for companies. Under the policy, companies can import up to 8,000 high-end EVs, priced above $35,000 each, at a concessional import duty of just 15%. This is a major reduction from the current effective import tariff, which exceeds 110%. In return, companies are required to invest in setting up a manufacturing facility that must be operational within three years. The facility must achieve at least 25% domestic value addition initially and 50% within five years of receiving approval from the Ministry of Heavy Industries.

The application window for the scheme will be open for 120 days once the guidelines are finalized. Companies that meet the criteria will be able to apply for the import concessions, but they will need to meet the turnover targets as well, which include Rs 5,000 crore by the fourth year and Rs 7,500 crore by the fifth year of production.

Impact on Global Auto Giants

The finalization of these guidelines has sparked interest from major international automakers, with Hyundai and Volkswagen expressing their intention to invest in India. These companies see the new policy as a potential boost for local manufacturing and are considering whether to proceed with the proposed investments or rely on imports.

Despite the attention surrounding the policy, the government has not yet heard from Tesla, a company that was initially seen as a key focus of the policy. Tesla’s plans to enter the Indian market were put on hold after the announcement of the policy last March, just before the general elections. Tesla’s CEO, Elon Musk, had even planned a visit to India, but those plans were eventually shelved.

Timeline and Future Prospects

Once the guidelines are cleared by Heavy Industries Minister H.D. Kumaraswamy, the application process will begin, with approval letters expected to be issued by July or August. If all goes according to plan, the subsidized imports of high-end EVs could begin in the following months, marking a new phase for India’s EV market.

The government’s push for local manufacturing and substantial investment in the EV sector comes at a crucial time, as India aims to position itself as a key player in the global EV industry. As automakers weigh their options, the policy’s success will depend on how well it balances attracting foreign investment with fostering a robust domestic EV industry.

Looking Ahead

The future of India’s EV sector now hinges on the finalization of these rules and the decisions made by global automakers. As the window for applications opens, all eyes will be on companies like Tesla, Hyundai, and Volkswagen to see if they commit to the policy’s long-term goals. For India, the EV policy could be the catalyst needed to accelerate its shift towards a cleaner, greener automotive industry.