The Government’s approval of an electric vehicle policy to promote India as a manufacturing destination for EVs with the latest technology marks another significant step towards accelerating the adoption of cutting-edge technology and fostering innovation in India’s automotive sector by attracting investments in the e-vehicle space by reputed global EV manufacturers. With EVs expected to become a major category within the sector, the policy is drawing a loud cheer from the auto sector for its emphasis on domestic value addition for creation of a robust supply-side ecosystem, Make in India momentum and a positive impact on health and environment.
“Aligned with the Government’s vision of reducing our carbon footprint, promoting sustainable manufacturing, and achieving net-zero emissions by 2070, this policy sets the stage for a vibrant future-mobility global manufacturing hub in India,” agrees Shradha Suri Marwah, President ACMA & CMD Subros. Coming opportunely amidst India’s emergence as the world’s third largest automobile market and one of the fastest growing in the world, the policy looks to promote healthy competition among EV players leading to high volume of production, economies of scale and lower cost of production. The current market size of the automotive sector is Rs.12.5 lakh crore (USD151 billion) and the sector is expected to cross Rs 24.9 lakh crore (USD 300 billion) by 2030. The automotive sector contributes over 7.1 per cent to India’s GDP.
The EV policy requires a company to make a minimum investment Rs 4150 crore (USD 500 million) but there will be no caps on the maximum investment and offers a 3 year-timeline for setting up manufacturing facilities in India and starting commercial production of EVs. Companies setting up manufacturing facilities for EVs will be allowed limited imports of completely built units of e-4W passenger cars with a minimum CIF value of USD 35,000 — at a lower custom duty of 15 per cent — as applicable to completely knocked down units – for a period of 5 years from the date of issuance of approval letter by the Ministry of Heavy Industries and subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
Chairman of Sona Comstar and Deputy Chair, CII Northern Region, Sunjay Kapur agrees that approval of the new E-Vehicle policy as a progressive step which fosters a conducive environment for global players to invest in India’s burgeoning market, offers minimum investment threshold and a clear roadmap for domestic value addition. As per the policy, the investor will have to comply with 50 per cent domestic value addition (DVA) within 5 years at the maximum but there is also a stipulation of (DVA during manufacturing with the Government mandating a localisation level of 25 per cent by the 3rd year.
What also appeals to Kapur “By incentivising local manufacturing and fostering healthy competition, this policy will not only accelerate the adoption of EVs but also bolster economic growth by way of reducing our reliance on imported crude oil and mitigating environmental impact, particularly in urban areas,” Kapur notes.
The policy also ordains that the applicant’s commitment to set up manufacturing facility(ies) and achievement of DVA shall be backed by a bank guarantee from a scheduled commercial bank in India equivalent to the total duty to be forgone, or Rs 4150 crore, whichever is higher, during the scheme period.