Centre approves new EV policy with tax cut on imported electric cars

In what could be an olive branch for foreign electric carmakers, India has approved a new electric vehicle policy that will allow lower import tax on EVs. The Centre has approved the new EV policy which is aimed to promote local manufacturing of electric vehicles. The Ministry of Commerce and Industry issued a notification today (March 15) elaborating on the guidelines and eligibility to avail the tax benefit on imported electric cars in India.

The new EV policy states that any electric vehicle manufacturer that will commit to invest at least ₹4,150 crore in India and a deadline of three years to start locally manufacturing electric vehicles will get import tax cuts on EVs. However, the policy restricts these EV makers to bring in a maximum 8,000 electric cars to India in a year. As part of the eligibility criteria, the EV maker must use 35 per cent of components from local markets to build cars. It also states that these manufacturers need to reach 50 per cent of Domestic Value Addition (DVA) within five years.

The import duty on electric vehicles by these carmakers will be reduced to 15 per cent provided their prices do not exceed $35,000 (roughly converted to ₹29 lakh). Currently, the Centre charges 70 to 100 per cent import tax on electric cars brought to India.

The move comes days after Piyush Goyal, Union Minister of Commerce and Industries, said that India will not alter its policy on EV import duty to benefit foreign carmakers. In an interview with PTI, Goyal had said, "Government does not tailor policy for any one individual company or its interests. Everybody is free to make their demands. But that does not mean that the government will necessarily take a decision (based on) what you demand."

The move is seen as yet another opportunity for foreign carmakers like Tesla to rethink its India launch strategy. The US-based EV maker had been trying to lobby for a lower import tax for the past couple of years to enter the Indian market. Talks have been held between the company and the Centre at different levels to iron out the issues. Tata Motors, the leading EV manufacturer in India, had earlier urged the Centre not to reduce import tax on electric cars and offer a level-playing field for local manufacturers.

Elon Musk, CEO and founder at Tesla, had recently met Prime Minister Narendra Modi in the United States earlier this year. During the meeting, he had hinted at Tesla's renewed interest to launch in India. Later, Union Minister Piyush Goyal too paid a visit to one of the Tesla facilities. The US-based EV maker offers some of the top-selling electric cars like Model 3, Model S, Model Y and Model X in global markets.