India Finalises New EV Import Guidelines; Offers Conditional 15% Duty Rate

The Central Government has notified new guidelines for the sale of EVs by foreign manufacturers. Under the new guidelines, carmakers looking to import electric vehicles in the market are set to receive excise benefits such as lowered import duty if they agree to invest a minimum of Rs 4,150 crore (USD 500 million) in manufacturing operations in India.

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As per the new guidelines, EVs imported by foreign carmakers with a cost insurance and freight valuation of USD 35,000 (About Rs 30 lakh) and over will attract a lower excise duty of 15 per cent – down from the current 110 per cent. However, there is still a catch.

Carmakers will only be allowed to import up to 8,000 units a year for a 5-year period at the reduced import duty or until a predetermined monetary cap is met, whichever is earlier. The monetary cap is the lesser amount of either the amount invested in to commencing local operations (a minimum Rs 4,150 crore) or a maximum forgone duty of Rs 6,484 crore, whichever is lesser.

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The policy states that unused quota from one year will be transferable to the next. Carmakers looking to import EVs under the scheme will be required to commence local assembly operations in the country within a three-year period while also achieving 25 per cent domestic value addition for the vehicle. This should rise to 50 per cent by the fifth year.

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The notification of the policy should finally open the doors to carmakers such as Tesla, which has already confirmed its India entry. This should allow the carmaker’s imported EVs to remain competitive in India despite being CBU imports, while it looks to commence its local assembly operations.