No disruption for domestic companies due to new EV manufacturing policy, says DPIIT Secretary

With an eye on attracting global electric vehicle manufacturers to India, the Ministry of Commerce has announced a new electric vehicle (EV) manufacturing policy. The government will reduce import duties on fully built cars from 100% to 15% for companies which commit to an investment of ₹4,150 crore to make in India.

Companies will have to begin manufacturing in three years, by when they would have to source 25% of the components locally and by the end of five years the company will need to have a 50% domestic value addition. All EV makers will have to submit a bank guarantee equivalent to the committed investment of ₹4,150 crore or more if the duty foregone by the government over three years is higher than ₹4,150 crore.

Speaking to CNBC-TV18 exclusively Department for Promotion of Industry and Internal Trade (DPIIT) secretary Rajesh Kumar Singh explained that the new policy intended to increase the adoption of electric four-wheelers which has been slow so far.

"It is in the public interest to bring in high-quality manufacturers to India with proven technologies. There was a feeling that tariffs were too high in India and some companies wanted to test the market before manufacturing. We have created a fine balance between the demands of global electric vehicle makers and giving the local electric vehicle ecosystem a boost. The policy will ensure both Make in India and our energy transition goals," he said.

The official emphasised that global EV makers have not been given a free pass to enter India but have to follow stringent performance criteria. If the company fails to meet the investment criteria or localisation targets, then their bank guarantees would be forfeited, he said.

Responding to concerns raised by Indian car makers the secretary said, "The tariff benefits are for a very limited period to minimise impact on local industry. 15% is the global average tariff on auto vehicles. Europe has 10% tariffs on imported cars, US tariffs are 2% and even China is at 15%.

The concessions are for a limited period of three years and that too in a segment where most domestic car makers don’t operate. We have really ensured that disruption for domestic manufacturers is a bare minimum."

The new electric vehicle manufacturing policy allows a car maker to import 8,000 cars per year. The concessional 15% duty will apply to cars costing $35,000 or more which is equivalent to ₹29 lakh. The secretary said the Indian government is welcoming all EV makers with calibrated interventions without any fresh budgetary outlay.

Recently, Vietnam’s electric vehicle maker Vinfast announced plans to set up manufacturing in Tamil Nadu. Elon Musk’s Tesla has been contemplating entering the Indian market and had previously flagged India’s high tariffs as a deterrent.