Government approves E-vehicle policy to propel India as premier manufacturing hub for EVs

In a move towards bolstering India’s position as a manufacturing powerhouse for electric vehicles (EVs), the Union Government has greenlit a comprehensive scheme aimed at attracting investments in the EV sector and promoting indigenous manufacturing of EVs equipped with cutting-edge technology.

According to a press release, the policy, approved by the Ministry of Commerce and Industry, is poised to revolutionize the automotive landscape in the country by fostering a conducive environment for reputed global EV manufacturers to establish their presence in India.

The overarching objective of the newly approved E-Vehicle Policy is to facilitate the manufacturing of EVs in India, thereby providing Indian consumers with access to state-of-the-art technology while fortifying the Make in India initiative.

By encouraging investments in the EV sector, the policy seeks to galvanize the entire EV ecosystem, fostering healthy competition among industry players, driving up production volumes, realizing economies of scale, and ultimately lowering the cost of production, read the press release.

Moreover, the policy is envisaged to curtail the nation’s reliance on crude oil imports, narrow the trade deficit, mitigate air pollution–especially in urban areas–and yield substantial benefits for public health and the environment.

Outlined within the policy are key provisions aimed at incentivizing investment and promoting domestic value addition in the manufacturing of EVs.

Companies venturing into the manufacturing of EVs are mandated to make a minimum investment of Rs 4150 crore (approximately USD 500 million), with no upper limit on the maximum investment, read the press release.

A stringent timeline of three years is set for the establishment of manufacturing facilities in India and the commencement of commercial production of EVs. Additionally, companies must achieve a domestic value addition (DVA) of 50 per cent within five years at the maximum.

To incentivize companies setting up manufacturing facilities in India, a customs duty of 15 per cent (as applicable to Completely Knocked Down (CKD) units) will be levied on vehicles with a minimum cost, insurance and freight (CIF) value of USD 35,000 and above for a period of five years, read the press release.

Companies investing in manufacturing facilities in India are permitted limited imports of EVs at a lower customs duty rate. The duty foregone on the total number of EVs allowed for import will be capped at the investment made or Rs 6484 crore (equivalent to the incentive under the Production-Linked Incentive (PLI) scheme), whichever is lower.

Import limits will be capped at a maximum of 40,000 EVs, subject to specific investment thresholds.

Investment commitments made by companies must be supported by a bank guarantee, which will be invoked in the event of non-compliance with DVA and minimum investment criteria stipulated under the scheme guidelines.

The introduction of the E-Vehicle Policy underscores the government’s unwavering commitment to fostering a conducive environment for the growth of the EV sector in India.