India’s New EV Policy Introduces Conditional Import Duty Reduction; Set To Benefit Tesla, Vinfast

In a decision that is likely to lure big names from the global electric vehicle (EV) industry to the country, the Indian government has announced a condition reduction in import duty on EVs. Under a new e-vehicle policy, the government will slash import duty from 100 per cent to just 15 per cent for imported electric vehicles with a cost, insurance, and freight (CIF) value of USD 35,000 (Rs 29 lakh) and above, provided their respective manufacturers commit to making a minimum investment of USD 500 million (approx. Rs 4,150 crore) to set up local manufacturing within a three-year period.

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As per the policy, EV manufacturers are mandated to establish production facilities within three years and commence commercial production of electric vehicles in the country. Additionally, they must achieve a domestic value addition (DVA) of 25 per cent by the third year and of at least 50 per cent within five years.

The reduction in import duty will help Tesla price its imported products competitively.

During this period, the government will permit the import of a maximum of 40,000 EVs at the lowered import duty, roughly amounting to 8,000 EVs a year, with the carrying-over of unutilised annual import limits being allowed, provided a manufacturer’s total investment amounts to USD 800 million (Rs 6,629 crore) or more. The total duty waived off for imported EVs will be limited to the investment made by its manufacturer, or Rs 6,484 crore (equal to incentives offered under the PLI scheme) whichever is lower. Companies failing to meet the prescribed DVA and investment criteria will face invocation of bank guarantees.

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This move is set to pave the way for Tesla’s India entry, with the EV giant having lobbied hard for a drop in duty on imported EVs before formalising its India plans. All of its offerings – including the Model 3, Model S, Model X, Model Y and the Cybertruck – cost well over USD 30,000. Tesla is reportedly working on a more affordable EV, dubbed ‘Project Redwood’, which could eventually be produced in India.

The announcement is also likely to benefit Vietnam’s Vinfast Auto, which recently inked an MoU with the Tamil Nadu government and broke ground at its upcoming EV manufacturing facility in Thoothukudi, which will have an annual capacity of 150,000 units.