The central government will reduce import duties from 100 to 15% for brands making minimum investment of Rs. 4,150 crore and committing to local production
In a move designed to lure investments from abroad, the central government has endorsed an Electric Vehicle (EV) policy. This initiative allows companies committing a minimum investment of Rs. 4,150 crore locally and meeting domestic value-added requirements to import vehicles in limited quantity with noticeable customs relaxations in an aim to stimulate innovation and propel growth in the EV sector.
The government believes that the initiative will grant Indian consumers access to latest technology, bolster the Make in India initiative, and fortify the EV ecosystem by fostering healthy competition among EV makers. This, in turn, is projected to drive volumes, achieve economies of scale, and keep the production costs in check making them more accessible.
As per the policy, investors are afforded a three-year timeframe to establish manufacturing facilities domestically, commence production and achieve a 50 percent domestic value addition within a maximum period of five years. It is specified that a minimum of 25 per cent DVA must be attained by the end of the third year.
Tesla has been having back and forth conversations with the government over the last few years and the recent move could seal the deal once and for all. VinFast Auto Ltd, a Vietnam-based electric vehicle manufacturer, has initiated construction activities to establish a new integrated EV manufacturing facility in Thoothukudi, located in southern Tamil Nadu.
The company intends to invest Rs. 4,000 crore over a period of five years for this project. The new policy further indicates that vehicles with a minimum Cost, Insurance, and Freight (CIF) value of USD 35,000 (Rs. 29 lakh approximately) will be subject to a customs duty of 15 per cent, applicable to Completely Knocked Down (CKD) units.
The duty rate of 15 per cent will be applicable for five years, contingent upon the manufacturer setting up facilities in India within a period of three years. Presently, vehicles priced below USD 40,000 (Rs. 33.16 lakh approximately) are subject to customs duties of 70 per cent, while those priced above this threshold incur a duty of 100 per cent.