India plans to expand EV production incentives
December 11, 2024
India is planning to expand its incentives for Electric Vehicle (EV) production to include automakers that manufacture their models in existing facilities within the country, instead of limiting the benefits to automakers willing to build new plants, Reuters reported.
India’s EV policy, which is still being finalised, was designed to encourage Tesla to enter the market and manufacture locally. However, the US automaker abandoned those plans earlier this year.
Several foreign automakers have reportedly expressed interest in producing EVs in India, either at existing facilities or by establishing new factories. This information comes from the minutes of a meeting with India’s Ministry of Heavy Industries, which were reviewed by Reuters. Sources indicate that there is optimism that policy changes will attract EV investments from companies such as Toyota and Hyundai.
Under the policy announced in March, an automaker investing at least $500 million to manufacture EVs in India to benefit from significant import tax reductions. If the automaker sources at least 50% of its components locally, the import tax can be lowered to 15% (down from as high as 100%) for up to 8,000 electric cars per year.
Expanding investment terms
Reuters stated — citing a source who was not authorised to speak to the media and declined to be identified — that the government will now also consider investments in electric vehicles at existing factories that currently produce gasoline-engine and hybrid cars.
However, the source shared that the electric models must be built on a separate production line and meet the local sourcing criteria.
The source shared that a new factory’s investment in machinery and tools to build EVs will be counted in full towards the $500 million requirement even if the equipment is also used to manufacture other types of cars.
To ensure fair treatment of automakers, the government will establish a minimum revenue target for EV production that must be met by a plant or production line to qualify for the scheme, according to the source.
The source added that the policy would be finalised by March.
Interested companies
Reuters shared that the minutes of the meeting showed that Toyota officials inquired whether the EV policy would permit the investment in a separate assembly line within a plant that produces multiple powertrains. They also wanted to clarify whether the manufacturing and installation of charging stations would be considered part of the $500 million investment requirement.
Hyundai reportedly asked if money spent on research and development could be counted toward the $500 million investment requirement. The source shared that it would not be counted.
A spokesperson for Hyundai Motor India told Reuters that the company is awaiting the rollout of the final policy and guidelines.
Volkswagen’s India subsidiary is reportedly seeking more flexibility with the investment timeframe. It has requested permission to invest 75% of the $500 million within the first three years of the five-year plan, rather than the current requirement of 100%. Additionally, the company is looking to clarify whether investments made by suppliers would be eligible.
Volkswagen reportedly stated that it was studying the latest EV policy ‘in detail’ and would evaluate a way forward accordingly.
