The Indian government has approved a new EV policy that makes importing electric cars into India cheaper and opens the way for world-class EV manufacturing facilities. EV makers can import electric vehicles at a 15% duty in India. Due to this, upcoming imported electric car prices in India will be less expensive, especially in the premium EV segment like Tesla.
Let’s discuss the newly “approved e-vehicle policy” that will surely encourage the manufacturing of electric vehicles in India. You may get confused and wonder how a 15% import duty will help set up EV manufacturing, but wait. Our government has added several country-beneficial conditions to avail 15% import duty on EV manufacturers.
Here are the conditions
- First, the EV maker must invest a minimum of ₹4150 crore (~$500 million) in the country. The company can invest more if it wants to since there is no limit on maximum investment.
- Second, the Indian government has set a deadline of 3 years for EV manufacturers to set up manufacturing facilities in India with DVA (Domestic Value Addition).
What is DVA (Domestic Value Addition) in Electric Vehicle
DVA means using locally or domestically manufactured parts in the manufacturing of EVs. DVA of parts will help to create an ecosystem and reduce imports. Besides, this also helps reduce dependence on other countries for spare parts. In short, “Made-in-India” parts will also be used to manufacture EVs.
However, the percentage of DVA can vary, and it entirely depends on the government or the manufacturer as to what percentage of local content they have to include in a product.
For example, if an electric vehicle (EV) has a 25% domestic value added (DVA), it means that 25% of EV parts are domestic, while the remaining 75% are imported from foreign countries. Achieving close to 100% DVA is difficult but should be a goal for every country.
- Third, to improve the localization of the EV, the Indian government set the level of DVA. The EV manufacturer has to achieve 25% DVA in 3 years and 50% in 5 years.
- Fourth, a 15% customs duty will be applicable on EVs with CIF (cost, insurance and freight) value of $35,000 and above (>about ₹30 lakh) for up to 5 years. With this condition, the Indian government ensures that foreign players will not impact the domestic best electric car companies. Indian brands like Tata and Mahindra make electric cars on a low budget.
- Fifth, the total number of EVs to be imported will be limited by the investment made by a company or ₹6484 Crore (equal to incentive under the PLI scheme), whichever is lower. If $800 million (roughly ₹6484 crore) or more is invested, a maximum of 40,000 EVs are allowed to be imported at a rate of not more than 8,000 per year. However, the carryover of unutilized annual import limits would be permitted.
- Sixth, The Investment commitment made by the company will have to be backed up by a bank guarantee. The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
Premium Electric Car Prices in India would be Inexpensive.
Earlier this scheme, imported electric car prices in India were double that of foreign countries due to import duty of up to 100%. For example, if launched earlier, Tesla’s entry-level ₹30 Lakh Model 3 electric car prices in India would have been more than ₹60 lakh due to the 100% import duty. Imagine how much just a 15% charge would reduce the total cost of ownership of a Tesla EV.
Moreover, high import duties and forcing to build manufacturing plants first to sell EVs discouraged many EV makers from investing in India. Indian government renewed their electric vehicle scheme and took the middle path to invite foreign EV makers that will make India a world-class manufacturing destination for EVs. No doubt electric car manufacturers like Tesla, Vinfast and many others will now feel much more comfortable investing, and selling their electric cars in India.
Tesla is a brand that the people of India are eagerly waiting for. But Tesla’s path got stuck in complex laws, import duties, and things like importing from China. Elon Musk wants to import its Tesla cars from China and sell them in India and our government is simply blocking the China import thing at a large scale.