EV Policy To Attract Global Players, Help India Become Manufacturing Hub: Experts

The electric vehicle policy will help attract global players to invest in India while ensuring that the country becomes a global manufacturing hub for future mobility solutions, according to experts.

The government on Friday approved an electric-vehicle policy, under which duty concessions will be given to companies setting up manufacturing units in the country with a minimum investment of $500 million, a move aimed at attracting major global players like US-based Tesla.

Welcoming the new EV policy, Automotive Component Manufacturers Association (ACMA) President Shradha Suri Marwah said the initiative marks another significant step towards accelerating the adoption of cutting-edge technology and fostering innovation in India's automotive sector.

"The policy not only aims to attract global EV majors to invest in India but also emphasises a significant Domestic Value Addition (DVA) criteria, ensuring the creation of a robust supply-side ecosystem," she added.

Aligned with the government's vision of reducing carbon footprint, promoting sustainable manufacturing, and achieving net-zero emissions by 2070, the policy sets the stage for a vibrant future-mobility global manufacturing hub in India, Marwah said.

ACMA represents 850 manufacturers contributing to more than 85 per cent of the auto component industry's total turnover.

Icra Senior Vice President and Group Head -- Corporate Ratings -- Shamsher Dewan said the policy would help access global technologies, expand the product range, and improve cost competitiveness, all of which would facilitate enhanced EV adoption.

Icra currently expects about 15 per cent of new car sales to be electric by 2030, he added.

"Further, countries that have been front-runners in EV adoption have also developed a local vendor ecosystem. This policy is a step in the right direction and would aid in increasing EV components localisation in India, which is currently at 30-40 per cent," Dewan stated.

Khaitan & Co. Partner Ashraya Rao said the policy should help new players strategise their India entry and undertake capital allocation efficiently.

Induslaw Partner Saurav Kumar said the policy is anticipated to benefit new-age automakers like Tesla, Rivian, and Lucid, who have been advocating for reduced import duties in exchange for their pledge to the 'Make in India' initiative.

Moreover, the scheme takes learnings from previous challenges encountered during FAME-II by establishing transparent localisation standards through the verification of domestic value addition (DVA), thereby offering a more streamlined and transparent process for OEMs, Rao stated.

Servotech Power Systems founder and Managing Director Raman Bhatia noted that the policy will make India a global powerhouse for EV manufacturing.

"Keeping a strong focus on prioritising domestic manufacturing and encouraging competition and growth, this policy will provide enough chances and harbour enough space to facilitate increasing the adoption of EVs across the nation," he added.

US EV major Tesla has been seeking an initial tariff concession that would allow it to offset 70 per cent customs duty for cars priced less than $40,000, and 100 per cent for cars of higher value.

Tesla has pitched the concession demand as a precondition to build a plant in India. The Indian factory, as and when it happens, would be Tesla's sixth vehicle plant.

At present, cars imported as completely built units (CBUs) attract customs duty ranging from 60 per cent to 100 per cent, depending on engine size and cost, insurance and freight (CIF) value less or above $40,000.

The fast-growing EV market in India is catching the eyes of global players.

India's electric vehicles market is expected to grow to one crore units in annual sales by 2030 and create five crore direct and indirect jobs, according to the Economic Survey 2022-23.

As per industry estimates, the total EV sales in India stood at around 10 lakh units in 2022.

In India, Tata Motors is the leading player in passenger electric vehicles.

According to an official statement, the companies setting up manufacturing facilities for e-vehicles will be allowed to import a limited number of cars at lower customs duty.

The policy seeks to promote India as a manufacturing destination for EVs and attract investment from reputed global EV manufacturers, it added.

Under the policy, a company will be required to make a minimum investment of $500 million or Rs 4,150 crore. There will be no upper investment limit.

A Mahindra & Mahindra spokesperson said the EV policy for new entrants reinforces the Make in India momentum with requirements of bank guarantees, minimum investment commitment, and local value addition.

This will help accelerate the EV ecosystem in India, the spokesperson added.

"Our Born Electric SUVs are on track to be launched in Jan 2025 with cutting-edge technology. Our products will speak for themselves," the spokesperson stated.