Participating companies must establish manufacturing facilities in India within three years and commence commercial production of EVs.
However, there is a catch. Participating companies must establish manufacturing facilities in India within three years and commence commercial production of EVs. Additionally, they are required to achieve a maximum of 50% domestic value addition within five years. As an incentive, companies investing in EV manufacturing facilities will be permitted limited imports of cars at a reduced customs duty rate.
“This will provide Indian consumers with access to the latest technology, boost the Make in India initiative, and strengthen the EV ecosystem by promoting healthy competition among EV players, leading to a high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment” the government said in a statement.
The development should be seen in the context of possible US luxury car maker Tesla which has been intending to enter India since past years and wanted India to water down its policies to make it viable for it. Although the government had been toying with the idea, but had been facing barrage of resistane from Indian and foreign OEMs already operating in India. They claim that it will be against the spirit as these OEMs have beeen working for years to localize the products within the country.
A localisation level of 25% by the 3rd year and 50% by the 5th year will have to be achieved.
The customs duty of 15% (as applicable to CKD units) would be applicable on vehicle of minimum CIF value of USD 35,000 and above for a total period of 5 years subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
The duty foregone on the total number of EV allowed for import would be limited to the investment made or Rs 6484 crore (equal to incentive under PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of USD 800 million or more. The carryover of unutilised annual import limits would be permitted.
The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone.
The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
With inputs from Shahkar Abidi and Kiran Murali