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News: The Union Government has approved a scheme to promote India as a manufacturing destination so that e-vehicles (EV) with the latest technology can be manufactured in the country. The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers in PV domain. Brief contours of the policy include: (i) concessional import duty of 15% for Electric Cars with minimum CIF value of US$ 35,000 to a maximum of 8,000 units per year over a 5-year period with maximum volumes under concessional duty being limited by duty forgone equivalent to its committed investment in India (min. ₹ 4,150 crore/US$500 million) or ₹ 6,484 crore (US$ 781 million) whichever is lower (ii) commissioning of manufacturing facility within three years of application approval, (iii) meeting of localisation content (domestic value addition; DVA) of 25% within 3 years and 50% within 5 years of application approval and (iv) adequate bank guarantees to safeguard India’s economic interests.
Views: Present import duty is levied to the tune of 100% for a car which has CIF value at >US$40,000 and 70% for cars which are CIF valued at <US$ 40,000. The announced policy is progressive in nature as it allows new tech-oriented OEM players to enter Indian markets and at the same time safeguards interest of domestic auto OEM manufacturers by allowing concessional duty only after a threshold Electric Vehicle sales price i.e. US$35,000 CIF equivalent to ~₹ 30 lakh. We believe it to be neutral for Tata Motors, M&M and Maruti which are currently working in this domain and have no product offerings in the high-end category. It might however lead to some competition in the premium segment especially by the ones being offering by luxury car manufacturers such as Mercedes Benz, BMW, JLR etc. however even these players could think at potentially investing in manufacturing set up in India in due course of time.
Impact: Positive