The government on Friday approved a new electric vehicle policy in a bid to promote India as a manufacturing hub for electric vehicles, according to the statement by the ministry of commerce.

Under the new policy, the automobile manufacturers is required to make a minimum investment of ₹4,150 crore or $500 million with no cap on maximum investment. The government has given a three-year timeline to automakers for setting up new manufacturing facilities in India and start commercial production of EVs, and reaching 50% domestic value addition (DVA) within 5 years at the maximum.

As per the ministry, a localisation level of 25% is to be achieved by the third year and 50% by the fifth year. The customs duty of 15% (as applicable to CKD (completely knocked down) units) would be applicable on vehicles of minimum CIF (cost, insurance and freight( value of $35,000 and above for a total period of five years subject to the manufacturer setting up manufacturing facilities in the country within a period of three years.

The duty foregone on the total number of EVs allowed for import would be limited to the investment made or ₹6484 crore, according to the ministry. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is $800 million or more. The carryover of unutilized 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,” says the ministry.

The new EV policy is likely to pave the way for Elon Musk’s Tesla in the country, which has been asking for lower import duties for bringing its electric vehicles. Several other automakers including Mercedes Benz, BMW, and Aston Martin amongst others have also voiced their concerns regarding high import duties.

Notably, in order to give a boost to EV production, the government earlier this week, also unveiled the new Electric Mobility Promotion Scheme 2024 with a total outlay of ₹500 crore for electric two-wheelers and three-wheelers. The new scheme will run for four months from April 1, 2024, to July 31, 2024. India's expanding electric vehicle industry was seeking an extension of the FAME scheme.

EV Manufacturing Hub

Govt approves new EV policy; minimum investment fixed at ₹4,150 cr