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India Launches Progressive EV Policy to Boost Manufacturing and Attract Global Players

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India's New EV Policy
Vitaliy Karimov/Shutterstock.com

India has embarked on a significant journey towards becoming a leading player in the electric vehicle (EV) sector with the announcement of a new policy designed to attract substantial investments and advanced technologies from around the globe. On Friday, the Ministry of Commerce & Industry unveiled a strategic scheme aimed at positioning India as a global manufacturing hub for electric vehicles. This move is not just a step towards industrial advancement but also a leap into a sustainable future, aligning with the government’s vision to promote eco-friendly mobility solutions.

The new policy is crafted to lure reputable global EV manufacturers by offering lucrative incentives and creating a conducive environment for investment in the e-vehicle space. The primary goal is to provide Indian consumers with access to the latest EV technology, thereby fostering the ‘Make in India’ campaign. This initiative is expected to catalyze the growth of the EV ecosystem by stimulating competition, increasing production volumes, achieving economies of scale, and ultimately reducing the costs of production.

An essential aspect of the policy is its potential to significantly reduce India’s crude oil imports, thereby narrowing the trade deficit. Furthermore, it aims to tackle the pressing issue of urban air pollution, contributing to improved public health and environmental quality. The Ministry emphasizes that the holistic impact of this policy will not only bolster economic growth but also pave the way for sustainable development.

Key highlights of the new EV policy include:

  • A minimum required investment of Rs 4150 crore (approximately $500 million), with no cap on the maximum investment.
  • The establishment of manufacturing facilities in India within a three-year timeframe, kick-starting commercial production of electric vehicles, and achieving a 50% domestic value addition (DVA) within a maximum of five years.
  • A commitment to increasing the localization level to 25% by the third year and 50% by the fifth year of operation.
  • The application of a 15% customs duty on EVs with a minimum CIF value of $35,000 and above for five years, conditional upon the manufacturer setting up production facilities in India within three years.
  • A cap on the duty foregone on EV imports tied to the investment made or Rs 6484 crore (equivalent to the incentive under the PLI scheme), whichever is lower. This provision allows for the import of a maximum of 40,000 EVs, with an annual limit of 8,000 vehicles, for investments of $800 million or more.
  • An innovative provision allows for the carryover of unutilized annual import quotas, ensuring flexibility and long-term planning for investors.
  • The enforcement of a bank guarantee to safeguard against the non-achievement of the outlined DVA and minimum investment criteria, ensuring commitment and compliance from participating companies.

This ambitious policy framework is set to attract major international players, including giants like Tesla, by offering a balanced mix of incentives and obligations. The Indian government’s proactive approach aims to transform the country into a formidable force in the global electric vehicle market, setting a precedent for sustainable industrial growth and environmental stewardship.

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