HomePolicies & Regulations ›Union Government Greenlights Scheme to Boost E-Vehicle Manufacturing in India

Union Government Greenlights Scheme to Boost E-Vehicle Manufacturing in India

The policy's objectives are multifaceted, envisioning not only the provision of state-of-the-art technology to Indian consumers but also catalyzing the Make in India initiative.

March 15, 2024. By Abha Rustagi

The Union Government has given the green light to a scheme aimed at elevating India's status as a premier manufacturing hub for electric vehicles (EVs) equipped with cutting-edge technology. This initiative is poised to attract substantial investments from renowned global EV manufacturers, bolstering the nation's automotive sector.

The policy's objectives are multifaceted, envisioning not only the provision of state-of-the-art technology to Indian consumers but also catalyzing the Make in India initiative. By promoting a competitive landscape among EV players, the scheme aims to stimulate heightened production levels, achieve economies of scale, and drive down production costs significantly. 

Moreover, it aims to curtail the reliance on crude oil imports, thereby narrowing the trade deficit and mitigating urban air pollution, thereby fostering a healthier environment.

Outlined within the policy are several key provisions. A minimum investment of INR 4150 crore is mandated, with no upper limit specified. Companies are required to establish manufacturing facilities within three years in India and commence commercial production of e-vehicles. Within five years, a minimum of 50 percent domestic value addition (DVA) must be achieved.

Localization levels of 25 percent by the third year and 50 percent by the fifth year of manufacturing are stipulated. A 15 percent customs duty, applicable to completely knocked down (CKD) units valued at a minimum CIF (Cost, Insurance, Freight) of USD 35,000 or above, will be waived for a five-year period, contingent upon the establishment of manufacturing facilities within three years.

Abhishek Jain, Head of Indirect Tax and Partner at KPMG, highlights, "With India's vigorous drive in the electric vehicle revolution, the government's pioneering PLI scheme, coupled with recent initiatives like the Electric Mobility Promotion Scheme 2024 and the E Vehicle policy, underscores a resolute dedication to fortifying the EV sector, aligning with the 'Make in India' initiative to position India as a manufacturing hub."

The duty foregone on the total number of EVs permitted for import is capped at the investment amount or INR 6484 crore (equivalent to incentives under the PLI scheme), whichever is lower. 

A maximum of 40,000 EVs, not exceeding 8,000 units annually, is permissible for investments exceeding USD 800 million. Unused import limits can be carried over.

To ensure compliance, investment commitments must be backed by bank guarantees, which will be invoked if companies fail to meet DVA and minimum investment criteria.
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