Boosting EV production

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Union government approved a policy to promote India as a manufacturing hub for Electric Vehicles (EVs) on March 15, with a minimum investment cap of ₹4,150 crore.

  • Global EV Makers and Policy Features
    • The policy paves the way for global EV makers, including Tesla and Chinese EV maker BYD, to enter the Indian market.
    • A central provision is the reduction of import duty on electric vehicles imported as a Completely Built Unit (CBU) with a minimum CIF value of $35,000 from 70%-100% to 15% for a five-year period, provided the maker sets up a manufacturing unit within three years.
    • The policy also provides that a total duty of ₹6,484 crore or an amount proportional to the investment made, whichever is lower, would be waived on EV imports.
    • A maximum of 40,000 EVs can be imported under the scheme, not exceeding 8,000 units per year, with a minimum investment of $800 million.
    • Manufacturers are required to achieve 25% localisation by the third year and 50% by the fifth year. If targets are not met, bank guarantees would be revoked.
  • Impact on Domestic Players
    • Tata Motors opposed the Tesla proposal, suggesting that lowering duties could harm the domestic industry and affect the investment climate.
    • Rajat Mahajan from Deloitte India indicated that the policy is beneficial for Original Equipment Manufacturers (OEMs) catering to the higher end of the market, allowing global players and Indian JVs to expand in India.
  • Challenges in the Indian EV Market
    • I.V. Rao from TERI highlighted the importance of considering local circumstances like environment, roads, and usage conditions for global players in India.
    • Mahajan noted that passenger EVs have only a 2.2% market penetration due to factors like inadequate charging infrastructure, range anxiety, and limited affordable products.
    • A Confederation of Indian Industry (CII) report suggested that India would need at least 13 lakh charging stations by 2030 for aggressive EV uptake.
  • Concerns About the EV Ecosystem
    • Dinesh Abrol from the Institute for Studies in Industrial Development noted that the EV ecosystem must address the reliability and durability of components and service support.
    • He mentioned that Suzuki’s enhanced control in its business partnership with Maruti resulted in increased imports, indicating the potential for globalisation to affect domestic manufacturing priorities.
    • Abrol emphasized that the 21st century requires sustainability, suggesting that Indian manufacturers focus on domestic demand to guide product and system designs, rather than solely on competitive products.

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