In March 2024, the Indian government introduced a new Electric Vehicle (EV) policy aimed at attracting global automotive giants, including Tesla, to invest in the country. While this policy focuses on encouraging the establishment of new manufacturing plants, the government is now considering extending incentives to automakers who wish to produce electric models at their existing facilities, according to a Reuters report. This move could potentially lead to more affordable electric cars in India.
Key Highlights of the New EV Policy
The new EV policy, still in the final stages of development, requires automakers to invest a minimum of Rs 4,150 crore to set up manufacturing facilities for electric vehicles within a three-year time frame. These manufacturers must also begin commercial production by the end of the three years. Additionally, the policy mandates a 25% localization by the third year, which increases to 50% by the fifth year to qualify for a reduced customs duty of 15% on Completely Knocked Down (CKD) units for five years. Automakers will be permitted to import up to 8,000 EVs annually under the new policy, provided they meet the specified criteria.
Although Tesla has yet to announce its plans for a manufacturing facility in India, the new approach would allow the government to incentivize existing carmakers to shift some of their production to electric vehicles. However, automakers would need to set up a separate production line for EVs and meet the local sourcing criteria. The finalized policy is expected by March 2025.
Impact on EV Prices
This new policy is expected to benefit global automakers like Hyundai, Kia, Toyota, Volkswagen, and Skoda, which already have manufacturing plants in India. Currently, the import duty on CKD cars stands at 35%, but under the revised EV policy, the import duty on CKD EVs will be reduced to 15% for the next five years. This will lead to lower prices for imported electric cars, potentially making them more affordable for consumers.
In India, the EV segment is still in its infancy, with electric vehicles accounting for less than 3% of the total passenger vehicle sales. However, several carmakers are gearing up to launch new electric models in the country. Maruti Suzuki, India’s largest carmaker, is expected to launch its first EV, the eVX-based e Vitara, by Q4 FY25. Hyundai Motor India is also set to introduce the Creta EV by the same period. Tata Motors already offers a range of electric vehicles, including the Tiago.ev, Tigor.ev, and Nexon.ev, among others. Mahindra offers electric SUVs like the XUV400 and the newly launched BE 6e and XEV 9e.
Luxury automakers, including Mercedes-Benz, BMW, and Audi, have also launched a range of electric models in India, adding to the growing EV options in the market.
GST Advantage on EVs
Electric cars in India benefit from a lower Goods and Services Tax (GST) of 5%, compared to the 28% GST on internal combustion engine (ICE) cars. This lower tax rate further reduces the price of electric cars, making them an attractive option for eco-conscious consumers.
Should You Buy an EV Now or Wait?
With multiple EV options already available in the market, there is no immediate need to wait for the policy to be finalized. Manufacturers like Tata, MG, and Mahindra already offer good electric vehicles, with more models expected from Maruti Suzuki, Hyundai, and others by 2025. As for the pricing of imported electric cars, it remains uncertain, and it’s difficult to predict the battery and range options they will offer.
Improving Charging Infrastructure
As the EV market grows, the charging infrastructure in India is also expanding. The government’s PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, with an outlay of Rs 2,000 crore, is set to significantly enhance the public charging network. The scheme includes the installation of 22,100 fast chargers for electric cars, 1,800 fast chargers for buses, and 48,400 fast chargers for two-wheelers and three-wheelers. In addition to home chargers, automakers are installing charging stations at their dealerships, and public charging points are also being set up at malls, corporate parks, hotels, and select fuel stations.
In conclusion, the Indian government’s new EV policy could play a crucial role in making electric cars more affordable in the country, benefiting both consumers and automakers. With more EV options and an improving charging infrastructure, now might be a good time to consider making the switch to an electric vehicle.
