India's New EV Policy Boosts Tesla's Market Entry Plans

Tanushree Jaiswal Tanushree Jaiswal 20th March 2024 - 06:32 pm
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India rolled out a fresh electric vehicle (EV) policy on Friday, aiming to woo foreign players like Tesla and Vinfast into the country's budding electric car sector.
Under the new policy, foreign automakers are now eligible to import up to 8,000 EVs annually, priced at $35,000 or higher, at a reduced import duty of 15% (down from the previous 70%). This applies provided they pledge to invest at least $500 million in India over the next three years.

Furthermore, these companies must kickstart local manufacturing operations and ensure that 50% of the vehicle's value is added domestically within three years, with a target of 50% within five years. Oversight of this scheme falls under the purview of the Ministry of Heavy Industries.

Initial discussions had centered around a price range of $25,000 to $35,000 for eligible EVs. However, domestic manufacturers such as Tata Motors and Mahindra & Mahindra advocated for raising the threshold to safeguard their investments and competitive edge.
Tesla, initially negotiating for a duty reduction on a $25,000 EV, is now expected to introduce its Model 3, priced close to $40,000 globally, in India. The company also plans to localize its operations to penetrate the Indian market.

This policy maneuver is strategically timed, coming just before the anticipated announcement of the model code of conduct for the upcoming general elections. It positions India as an attractive destination for business while addressing concerns from the domestic industry.

To ensure adherence, the government will mandate bank guarantees equivalent to the reduction in import duty, refundable upon meeting all scheme criteria within five years.
However, there's a catch for existing OEMs like Hyundai, Kia, BYD, MG Motor India, Mercedes Benz, and BMW. Unless they pump fresh investments of at least $500 million into the country in the next three years, they won't benefit from this policy.

The goal? To inject a fresh wave of competition into India's EV sector and ignite innovation. Mahindra & Mahindra sees this as a big win for the "Make in India" campaign, accelerating the EV ecosystem's growth.

Tesla's looming entry has sparked debates on charging infrastructure standards. While Tesla champions its own charging standards globally, India leans towards the Combined Charging System-2 (CCS2) standard.
Experts speculate that Tesla may embrace CCS2 in India, capitalizing on its widespread adoption among local OEMs and existing charging infrastructure. This strategic pivot aligns with Tesla's playbook—leveraging existing resources rather than starting from scratch.

The two-wheeler segment isn't left behind in the EV charging revolution. Ather's Light Electric Combined Charging System (LECCS) has emerged as a frontrunner, signaling a paradigm shift in the charging landscape.

In a nutshell, India's new EV policy marks a watershed moment in its automotive narrative, offering a fertile ground for global players while nurturing indigenous capabilities. As the industry braces for a seismic shift, the arrival of Tesla and its ilk promises to fast-track innovation and propel sustainable mobility solutions nationwide.

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