By The Indian government has unveiled a new policy aimed at fostering domestic manufacturing of electric vehicles (EVs), potentially opening doors for Tesla’s entry into the country. The policy seeks to promote environmentally friendly EVs while bolstering the ‘make-in-India’ initiative.
Key Policy Highlights
Under the new policy, companies intending to import electric vehicles into India must invest a minimum of $500 million to establish local manufacturing facilities within three years. Additionally, within three years, at least 25% of components must be domestically sourced, increasing to at least 50% within five years.
Reduced Import Taxes
Companies adhering to these guidelines will benefit from reduced import taxes. They will be permitted to import up to 8,000 completely built-up (CBU) electric cars annually at a 15% import duty for vehicles costing over $35,000 (approximately ₹28.99 lakh). This represents a significant reduction from the existing import taxes of 70% to 100%.
Enforcement Measures
To ensure compliance, companies are required to provide a bank guarantee for their investment commitment, which will be invoked if they fail to meet the policy requirements.
Potential Entry of Tesla
Industry experts speculate that the new policy could facilitate Tesla’s long-awaited entry into India. Elon Musk, CEO of Tesla, has previously expressed concerns over high import duties on electric vehicles. While Tesla models were reportedly approved in India in 2021, the company’s debut was postponed due to tariff issues.
Impact on Existing Players
The implementation of this policy may pose challenges for established players like Tata Motors and Mahindra and Mahindra, which have advocated against lowering import taxes to safeguard the domestic industry. Tata Motors, holding over 70% of the Indian electric car market, could face intensified competition with Tesla’s potential entry.
Potential for Growth
Beyond Tesla, other EV manufacturers, such as VinFast from Vietnam, have expressed interest in investing in India. VinFast plans to invest $2 billion and has initiated the construction of its first factory in Tamil Nadu.
The new EV policy marks a significant step towards promoting sustainable mobility and indigenous manufacturing in India, while also potentially reshaping the landscape of the country’s electric vehicle market.
