India is set to revise its electric vehicle (EV) incentives programme to attract more investment from foreign automakers. Unlike its previous framework, which primarily focused on encouraging new factories, the new strategy will extend incentives to manufacturers working with existing facilities. This adjustment aims to bolster the burgeoning EV sector within the country, catering to the interests of automotive giants such as Toyota and Hyundai, as well as potentially rekindling discussions with Tesla.
According to a source familiar with the situation, who wished to remain anonymous, the revised policy was discussed in a meeting with India’s Ministry of Heavy Industries. Originally intended to draw Tesla into the Indian market, the policy's initial framework failed to secure the necessary commitments from the U.S. automotive leader, which indicated a withdrawal from plans to manufacture in India earlier this year.
The new proposal permits automakers with factories currently producing gasoline and hybrid vehicles to qualify for incentives as long as they produce electric models on a separate assembly line that adheres to local sourcing standards. The government’s current policy, introduced in March, stipulates that any automaker investing at least $500 million to manufacture electric vehicles in India, with 50% of components sourced domestically, would benefit from a substantial reduction in import taxes—from as high as 100% to just 15% for up to 8,000 electric cars annually.
The source indicated that this shift in approach is aimed at creating a more conducive environment for EV manufacturing in India amidst reports of other automakers expressing interest in establishing production lines. Despite this, the government aims to ensure a level playing field by imposing a minimum revenue target on the production lines benefiting from the incentives.
Corporate stakeholders have voiced their queries regarding the specifics of the proposed policy. Minutes from the meeting revealed that Toyota inquired whether the policy would accommodate investments for establishing a separate assembly line within plants that produce multiple powertrains. Additionally, the company sought clarity on whether expenditures related to the construction of charging stations would be considered part of the $500 million investment threshold. Meanwhile, Hyundai has questioned whether funds allocated for research and development could count toward the same investment requirement; however, the source noted that research and development costs would not be included.
As anticipation builds regarding the upcoming regulations, Hyundai Motor India has expressed its eagerness for the rollout of the finalised policy and guidelines. The Indian government aims to finalise these changes by March, which is expected to provide clarity and direction for foreign automotive investments in the burgeoning EV landscape. The modifications to the EV incentive programme reflect a strategic pivot that could reshape business practices within the automotive industry in India, as it seeks to embrace greener technologies and bolster local manufacturing capabilities.
Source: Noah Wire Services