Tesla, Vinfast Await India’s EV Policy Reforms: Conditional Import Duty Reductions Unveiled،
In a strategic move to attract major players in the global electric vehicle (EV) sector, the Indian government has unveiled a groundbreaking initiative to significantly reduce import duties on electric vehicles. The bold move, introduced as part of a new electric vehicle policy, will see a drastic reduction in import duties from 100% to just 15%. The policy targets imported electric vehicles worth USD 35,000 (around Rs 29 lakh) and above, with manufacturers required to commit to substantial investments exceeding USD 500 million (around Rs 4,150 crore) for manufacturing local over a period of three years.
New electric vehicle import policy
Under the new policy guidelines, electric vehicle (EV) manufacturers are required to establish production facilities within a strict period of three years, which will revive commercial production of electric vehicles within the country's borders. Additionally, these manufacturers are tasked with achieving a national value added (DVA) threshold of 25 percent by the end of the third year, with a subsequent increase to a minimum of 50 percent over a period of five years.
During this specified period, the government has allowed the importation of up to 40,000 electric vehicles (EVs) at a reduced import duty, which translates to approximately 8,000 EVs per year. Notably, unused annual import quotas can be carried over, provided that the manufacturer's total investment exceeds $800 million (approximately Rs 6,629 crore).
Additionally, the total duty exemption for imported electric vehicles will be capped at the manufacturer's investment or Rs 6,484 crore (equivalent to PLI scheme incentives), whichever is lower. Companies that do not comply with the stipulated national value added (DVA) and investment criteria risk having bank guarantees applied in accordance with policy mandates.
The implementation of this policy marks a significant milestone, potentially paving the way for Tesla's long-awaited entry into the Indian market. Tesla, a leading player in the electric vehicle (EV) industry, has ardently advocated for a reduction in import duties on electric vehicles as a precondition for formalizing its plans for India . Notably, the entire Tesla lineup, including the Model 3, Model S, Model X, Model Y, and Cybertruck, exceeds the $30,000 threshold. Reports suggest that Tesla is actively developing a more affordable electric vehicle, known as “Project Redwood”, which promises potential local production in India, boosting the company's prospects in India's booming electric vehicle landscape .
Furthermore, the unveiling of this policy is set to extend its benefits to Vietnam's Vinfast Auto, an emerging competitor in the electric vehicle (EV) space. Vinfast recently solidified its commitment to the Indian market by signing a Memorandum of Understanding (MoU) with the Government of Tamil Nadu. Additionally, the company has launched the construction of its future electric vehicle manufacturing plant located in Thoothukudi. This state-of-the-art facility is expected to have an impressive annual production capacity of 150,000 units, positioning Vinfast as a formidable player in India's rapidly evolving electric vehicle landscape.
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