Govt cuts import duty on EVs to promote manufacturing
to launch ground-up premium EVs in India in the same price bracket, people aware of the matter said.
While Tesla was negotiating for the duty reduction to be available for an affordable $25,000 EV that it is planning to develop for markets like India, it will now likely to bring its Model 3, which sells at close to $40,000 globally, to India and work towards localizing its operations to kickstart its India entry plans, the people cited above added on condition of anonymity.
The move is being seen as a nifty balancing act by the government just a day before the expected announcement of the model code of conduct for the upcoming general elections, positioning India as a destination open for business while managing to not alienate the domestic industry. The government will also seek bank guarantees equalling the reduction in import duty on the vehicles from the carmakers, and will only return them if they meet all the criteria laid down under the scheme in five years.
“The move seems primed for Tesla’s entry to India. The Model 3 and Model Y are priced above $35,000 and will finally give the company access to the Indian market, in a culmination of its now years-long efforts to lobby for lower duties,” a senior EV industry executive, who did not want to be named, said.
“Vinfast, however, will have to identify the right model to bring to India as it has models in its global portfolio that are below the $35,000 price point or then in the luxury range, which might not be viable for a dealer distribution network in India,” he added.
Other people aware of the government’s plans said that the scheme will not be applicable to existing OEMs like Hyundai, Kia, BYD or MG Motor India, or European OEMs Mercedes Benz and BMW, unless they make a fresh investment of at least $500 million in the next three years, in assembly operations, or setting up a battery or cell manufacturing facility or in establishing charging infrastructure.
Detailed guidelines for the scheme are yet to be released. The company applying to be eligible under the scheme will also have to meet a minimum global turnover requirement of ₹10,000 crore.
“Domestic automakers won’t be adversely impacted because of the high price point cut-off. At a maximum cap of 8,000 cars a year, only early adopters and affluent buyers will buy these cars. Even with the reduced subsidy, a $35,000 EV will cost somewhere north of ₹40 lakh at the retail level, where the market is anyway extremely small,” another senior executive said on condition of anonymity.