The Union Government has approved a scheme aimed at positioning India as a premier manufacturing destination for cutting-edge electric vehicles (EVs), encouraging reputed global EV manufacturers to invest in the country. This policy initiative is intended to provide Indian consumers access to state-of-the-art technology while bolstering the Make in India initiative.
Key highlights of the policy include:
- Minimum Investment Requirement: Companies are required to make a minimum investment of Rs. 4150 Crores (approximately USD 500 million), with no upper limit on investment.
- Manufacturing Timeline: Companies must set up manufacturing facilities within a 3-year timeline to commence commercial production of EVs. Additionally, they are mandated to achieve a domestic value addition (DVA) of 50% within 5 years.
- Domestic Value Addition (DVA) Requirement: Manufacturers must achieve a localization level of 25% by the 3rd year and 50% by the 5th year of operation.
- Customs Duty: A customs duty of 15% will be applicable on EVs with a minimum CIF value of USD 35,000 and above for a period of 5 years. However, this duty can be waived if manufacturers establish manufacturing facilities in India within the stipulated 3-year period.
- Limited Imports: Companies setting up manufacturing facilities in India will be permitted to import a maximum of 40,000 EVs at a reduced customs duty rate, subject to their investment commitment. The duty foregone on imports will be capped at the investment made or Rs. 6484 Crores (equivalent to the incentive under the PLI scheme), whichever is lower.
- Bank Guarantee: Investment commitments must be backed by a bank guarantee, which will be invoked in case of non-compliance with the DVA and minimum investment criteria outlined in the scheme guidelines.
This policy framework is expected to catalyze significant investments in the EV sector, foster healthy competition, drive production efficiencies, reduce import dependency on crude oil, lower trade deficits, mitigate urban air pollution, and yield positive environmental and health outcomes.
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