New E-Vehicle Policy by Government, What’s For EV Manufacturing?

A new E-Vehicle policy was recently approved by the Indian Government. According to this new E-Vehicle policy, the Government strives to promote local manufacturing of EV components and create EV Manufacturing hubs.

The new EV policy emphasizes making India an EV manufacturing hub globally giving leverage to local players to enhance their manufacturing capacities and adapt high-tech EV technologies.

Under this policy, individual companies are dictated to invest at least Rs 4150 Cr first while giving them a timeline of three years to setup indigenous manufacturing facilities.

Minimum Investment of Rs 4150 Cr is required with no cap on maximum Investment under the new E-Vehicle policy.

“The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers,” said Ministry of Commerce & Industry in a statement.

The EV companies are said to start the commercial production of EVs with 50% domestic value to be reached within the next 5 years.

Also companies which are setting up local EV manufacturing can now enable limited imports of cars at lower custom duty.

Earlier the taxation bracket for imported cars was 70% or 100% depending on their value. With this new E-Vehicle policy, companies can import around 8,000 EVs in a year at a lower tax slab and import duty.

The attempt of the new EV policy is to spur the growth of EV manufacturing in India and to promote India as a manufacturing destination for electric vehicles(EVs). The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers.

Also, the latest EV policy mandates to use latest technologies in the process of manufacturing EVs in India. Further boosting the Make in India initiative, it also aims to foster the EV ecosystem and promote healthy competition among EV players.

This shall showcase the world-class production of EVs in India. Also, volume of production, economies of scale, lower cost of production, reduced imports of crude Oil, lower trade deficit, reduced air pollution, particularly in cities, and will have a positive impact on health and the environment.

Key Takeaways from the Latest E-Vehicle Policy:

• Minimum Investment required: Rs 4150 Cr (?USD 500 Mn)
• No limit on maximum Investment
• Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e-vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
• Domestic value addition (DVA) during manufacturing: A localization level of 25% by the 3^rd year and 50% by the 5^th 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 ?6484 Cr (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 Mn 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

Key Industry Comments on the New EV Policy:

Raman Bhatia | Founder & Managing Director | Servotech Power Systems Ltd. 

“The new electric vehicle policy will make India a global powerhouse for EV manufacturing. It is a boon for India’s booming economy and acts as a major push forward in the nation’s aspirations for clean transportation. Keeping a strong focus on prioritizing domestic manufacturing and encouraging competition and growth, this policy will provide enough chances and harbour enough space to facilitate increasing the adoption of EVs across the nation and aligns with the “Make In India “ initiative promoting local production and job creation. This policy acts as a gateway for large-scale investments from global EV giants like Tesla, making India an EV manufacturing hub globally and providing the much-needed impetus for the local players to enhance their manufacturing capacities and adapt high-tech EV technologies. This healthy rivalry will drive innovation, reduce production costs, and ultimately benefit Indian consumers with a broader range of high-quality, affordable EVs.”

Pratik Kamdar | CEO & Co-Founder | Neuron Energy Pvt Ltd.

“The recent announcement of the new EV policy by the Indian government marks a pivotal moment in the country’s journey towards sustainable transportation. We wholeheartedly applaud this progressive step, recognising it as a golden opportunity to position India as a global manufacturing hub, not only for domestic but also for international players in the electric vehicle industry.

This initiative not only aligns with the government’s ambitious ‘Make in India’ program but also promises to generate additional employment opportunities across the nation. By creating a favourable environment for EV manufacturing, the policy is poised to energise the domestic component sector, particularly benefiting battery manufacturers, and strengthen the financing ecosystem, thereby making electric vehicles more accessible to the masses.

Of notable significance is the provision for limited exports of EVs at reduced custom duty rates, which not only encourages local manufacturing but also attracts global players into the Indian EV market. This surge of international expertise and technology is set to enhance the quality standards of EVs available in India.

Furthermore, the new EV policy will help India become a global manufacturer of EVs, giving local companies a better chance against global competitors, especially in the markets for EVs two-wheelers, and three-wheelers. With support such as subsidies and the right infrastructure, Indian manufacturers can improve their products to compete worldwide. This will also help Indian manufacturers to sell high-quality products with the latest technological advancements at competitive prices globally. This move not only aids India’s economy but also encourages innovation and enhances Indian products worldwide, ensuring a steady supply of top-notch products to both OEMs and end consumers.

In essence, the new EV policy signals a significant shift towards a greener, more sustainable future for India’s transportation landscape while simultaneously fostering economic growth and technological advancement.” – Mr. Pratik Kamdar, CEO & Co-Founder, Neuron Energy.