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In a bid to attract global electric vehicle (EV) manufacturers into the Indian market and set up local manufacturing facilities, the Indian government has approved a new policy that will cut import taxes.
Key to the new policy is the lowering of import taxes on certain electric vehicles for companies committing to invest at least $500m in the country. These manufacturers will have three years to establish local EV manufacturing facilities and start commercial production, with at least 25% of components sourced domestically, increasing to 50% by the fifth year.
India currently levies a tax of 70–100% on imported cars depending on their value. EV manufacturers who now invest in EV manufacturing in the country will be allowed to import 8,000 EVs a year at a 15% import duty for five years on cars costing $35,000 and above.
India’s Ministry of Heavy Industries said that this policy will provide “Indian consumers with access to the latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment”.
This new policy could pave the way for global EV manufacturers to enter the South Asian market and expand their reach. Tesla has for some time been looking to enter India to expand its market.
According to an article in Tech Crunch, Tesla sought to establish an Indian footprint in 2021, but shelved its plans until New Delhi would allow the carmaker to sell and service imported cars in the country.
Under this new policy, Tesla may indeed decide to use India as a manufacturing base to export its vehicles to Southeast Asia.
Alongside Tesla, Vietnam’s electric carmaker VinFast also has its sights set on an India-based manufacturing hub. Earlier this year, it announced plans to invest $2bn in the country and said: “The plan to expand into India aims to seize growth opportunities in the world’s most populous nation and rapidly expanding EV market. This initiative forms a crucial part of VinFast’s strategy to establish a strong presence in key markets and strengthen its supply chain for global expansion.”
