Tesla India Launch Closer To Reality, Government Reduces Import Tax On EVs But With A Catch

• Government of India approves new electric vehicle policy to boost EV production in India. 

• New policy reduces import duty from 100 percent to 15 percent for global EV automakers under certain conditions. 

• Manufacturers need to make a minimum investment worth Rs 4150 crore in India for production. 

• New scheme also aims to provide Indian consumers with access to the latest technology. 

The Indian government has given the green light to an electric vehicle manufacturing scheme, where taxes are reduced from 100 percent to 15 percent for the import of EVs, but with a specific catch. This policy also aims to attract investments from global EV manufacturers, with a focus on encouraging local manufacturing of global EVs in the country.

Key highlights of the policy

The star attraction of this policy is the reduction of import duty from 100 percent to 15 percent for the import of electric vehicles for a period of five years. But that comes with a couple of terms and conditions. Vehicles valued at USD 35,000 (around Rs 29 lakh) or more will be eligible for import, with a maximum import limit set at Rs 6484 crore.

For starters, manufacturers making use of this policy need to commit to  a minimum investment of Rs 4150 crore (approximately USD 500 million) with no upper limit. They have  to establish production facilities in India within three years and achieve a localization level of 25% by the 3rd year, increasing to 50% within five years.

However, the scheme imposes restrictions on import volumes, permitting no more than 8,000 EVs annually. Any unused import quotas can be carried over to subsequent years. Manufacturers must provide a bank guarantee equivalent to the customs duty foregone to ensure compliance with localization and investment criteria.

How the new policy will affect consumers

The scheme not only promises to provide Indian consumers with access to latest technology but also aligns with the Make in India initiative. By encouraging competition among EV players, the new policy anticipates a surge in production volumes and also to use India as an export hub for global EV manufacturers. Additionally, it is expected to curtail crude oil imports, lower the trade deficit, and combat air pollution, particularly in urban areas, thus positively impacting public health and the environment.

We think this policy marks a significant leap in making India a manufacturing hub for e-vehicles, with major impacts on both the car industry and the nation's economy. Share your thoughts in the comments on what you think of the proposal.