India’s EV Policy: Key Changes to Manufacturing and Tax Relief

India’s EV Policy: Boosting Manufacturing, Capping Charging Infrastructure Investment

The government aims to promote electric vehicle (EV) manufacturing in India. They have introduced a new policy. This policy offers import tax cuts to foreign automakers investing in the country. However, there’s a catch. The policy restricts automakers from using funds spent on charging infrastructure for tax relief. It caps it at 5% of their total EV investment.

This policy, announced last year, aims to attract companies like Tesla to manufacture EVs in India. To qualify for the tax cuts, automakers must invest at least $500 million (roughly Rs. 4,336 crore) in a factory. In return, they’ll be allowed to import cars at a 15% tariff, significantly lower than the current 100% tariff ².

The government’s plan is to prioritize manufacturing over charging infrastructure development. An industry source revealed that New Delhi wants companies to focus on producing EVs in India. They should focus on this rather than just investing in charging networks. This move could impact automakers like Tesla. The company has already finalized two locations for showrooms in India. Tesla is expected to start selling imported EVs by April.

Key Highlights of the Policy:

• Investment requirement: Automakers must invest at least $500 million (roughly Rs. 4,336 crore) in a factory to qualify for tax cuts.
• Tax relief: Imported cars will be subject to a 15% tariff, instead of the current 100% tariff.
• Charging infrastructure cap: Automakers can only use 5% of their total EV investment for charging infrastructure development.
• Minimum turnover requirement: Companies must meet a minimum turnover of $577 million (roughly Rs. 5,004 crore) by the end of the fourth year of operation and $866 million (roughly Rs. 7,511 crore) by the fifth year to be eligible for lower tariffs.
• Penalty for non-compliance: Companies that fail to meet the minimum turnover requirement will need to pay a penalty. The penalty ranges from 1-3% of the revenue shortfall.

The government is currently holding consultations with carmakers. They are also consulting with other stakeholders on the draft rules. The rules are expected to be finalized next month. Foreign automakers like Hyundai and Toyota Motor have shown interest. They are looking to make EVs in India at both their existing and new factories.