A new EV policy approved by the government boosts Tesla’s entrance into India

On Friday, the government unveiled new electric vehicle (EV) legislation that is anticipated to significantly accelerate Tesla’s intentions to launch in India.

Under the new policy, import tariffs on certain electric cars would be lowered by the government for businesses that spend a minimum of Rs 4150 crore ($500 million) and establish a local manufacturing plant in the nation.

Companies are now required under the revised policy to invest a minimum of $500 million in India. They will have three years to set up local production plants for electric cars (EVs), with the requirement that at least 25 percent of the parts be purchased from inside the country.

Companies that fit these requirements will be allowed to import up to 8,000 electric vehicles (EVs) each year, with import duties cut to 15% for cars costing $35,000 or more. Depending on the car’s worth, India charges import taxes on imports that range from 70% to 100%.

Important EV policy points
What is the minimum investment needed?

The minimum investment required of interested corporations is Rs 4150 crore (USD 500 million). On the other hand, the maximum investment is unbounded.

What is the production schedule?

India should establish its manufacturing facilities in three years, begin producing e-vehicles for sale, and, at most, achieve 50% domestic value addition (DVA) in five years.

How is domestic value addition (DVA) determined throughout the manufacturing process?

The term “domestic value addition” (DVA) describes the proportion of locally produced parts utilized in production. Businesses need to localize at least 25% of their content by the third year and 50% by the fifth.

Are imported cars subject to any customs charges?

Yes, for a total of five years, a minimum CIF value of USD 35,000 and above would be subject to a 15% customs charge (as applicable to completely knocked down units), provided the company establishes manufacturing facilities in India within three years.

What happens if a business chooses to import EVs rather than produce them domestically?

The amount of tax waived on the total amount of EVs that may be imported will be capped at the investment amount or Rs 6484 crore, which is the same as the PLI program incentive, whichever is lesser.

If the investment is $800 million or more, a maximum of 40,000 EVs at a pace of no more than 8,000 per year would be allowed. Annual import limits that are not utilized may be carried over.

How is the commitment to the investment guaranteed?

In place of the customs duty waived, the company’s investment promise must be supported by a bank guarantee.

What happens if a business doesn’t fulfill the minimum investment and DVA requirements?

The bank guarantee will be used if the DVA and minimum investment requirements outlined in the plan rules are not met.