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The new EV policy includes a minimum investment requirement of Rs. 4150 million
India’s electric vehicle sector is set to witness a transformative change with the recent approval of a comprehensive electric vehicle policy by the central government. This policy offers a series of investment incentives and import duty reductions designed to attract global players, including the long-awaited arrival of Tesla.
One of the key highlights of the policy is the minimum investment requirement of Rs. 4150 crores (approximately 500 million dollars), to promote substantial investments in EV production infrastructure. Furthermore, the absence of a cap on the maximum investment amount provides flexibility to companies looking to expand their operations in India.
As per the new policy, companies venturing into production of electric vehicles will have a period of three years to establish their operations in India and start production. Furthermore, strict deadlines were established, determining an internal value addition (DVA) of 50% within five years, with a localization level of 25% to be achieved by the third year. These measures aim to encourage local production and increase local production capabilities.
Importantly, reducing import duties to 15% for electric vehicles with a minimum CIF value of $35,000 paves the way for global players like Tesla to enter the Indian market. This concessional rate, however, depends on manufacturers setting up production facilities within three years and investing $500 million in India. The move is in line with Tesla’s long-standing request for a reduction in import taxes.
It is worth noting that the policy imposes certain limitations and compliance measures to ensure compliance with its objectives. For example, the amount of tax waived on imported EVs is limited to the amount invested or Rs. 6,484 crores, whichever is less. Furthermore, a maximum limit of 40,000 EVs per year, together with specific rules, aims to effectively regulate imports.
To ensure compliance with the prescribed criteria for DVA and investment, manufacturers are required to provide a bank guarantee equivalent to the tax waived. This mechanism serves as a safeguard, ensuring that companies comply with their obligations under the policy framework.
Overall, India’s new electric vehicle policy represents a significant step towards accelerating the adoption of electric vehicles and promoting an enabling environment for the industry’s growth. By combining investment incentives with import duty reductions, the government aims to attract global players while promoting domestic production capabilities, ultimately driving sustainable development in the EV sector.
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