Vinfast To Miss Out On Tax Benefits On Imported Cars Under India's New EV Policy

The new EV policy guidelines issued by the Indian government aim to attract foreign carmakers to invest in India in order to be eligible for lower tax rates. Import duties, which stand at over 100 per cent presently, will be brought down to 15 per cent if the manufacturers meet certain conditions. These include setting an EV manufacturing facility in India by investing at least USD 500 (Approx Rs. 4,150 crore) million over the next 3 years.

Vinfast will begin its India journey later this year with the VF6 and VF7.

According to the Minister of Heavy Industries, HD Kumaraswamy, many carmakers have shown interest in investing under the policy, including Skoda-Volkswagen, Hyundai-Kia as well as Mercedes-Benz. However, since the manufacturers will need to first register for the policy and then start investing, brands such as Vinfast, who have already invested in a vehicle manufacturing facility, are likely to miss out on benefiting from lower duties while importing cars in the country, unless they commit to investing the specified amount again.

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

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. 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 foregone duty of Rs 6,484 crore, whichever is lesser.

Vinfast VF8 is likely to be imported to India at a later stage.

In 2024, reacting to the then proposed new EV policy, Pham Sanh Chau, CEO of VinFast India had said, “We highly value the Indian government’s new EV scheme as it aims to drive large investments in manufacturing, create competencies and upskilling, set up a robust supply chain and offer consumers world-class, zero tailpipe emission vehicles. With a long-term growth commitment in India, we have pledged an expenditure of $500 million, which includes the electric vehicle manufacturing facility in Tamil Nadu.”

The brand has set up its India manufacturing facility in Tamil Nadu.

In 2024, the Vietnamese electric car brand broke ground for a new electric vehicle factory in Tamil Nadu. The company has planned to invest Rs. 4,000 crore for its manufacturing operations in India in the next few years. The brand will kickstart sales in India with the VF6 & VF7 mid-sized SUVs later this year and is likely to start importing its flagship products into the country post that.