New EV policy slashes customs duty on specific vehicles, aims to promote India as manufacturing hub

The union government on Friday approved an e-vehicle policy to promote India as a manufacturing destination for electric vehicles (EVs).

The government said that companies setting up manufacturing facilities for EVs with a minimum investment of ₹4,150 crore will be allowed to import a limited number of cars at lower customs duty.

EV manufacturers will get three years to set up facilities in India and to start commercial production of vehicles. Further, they will be required to source at least 25% of the components sourced domestically.

Companies meeting these requirements will be allowed to import a maximum of 40,000 EVs at a customs duty of 15% on vehicles that cost $35,000 (₹29 lakh) or more. The import rate should not exceed 8,000 EVs per year. Presently, India imposes 70% to 100% customs duty on imported vehicles, depending on their value.

This move could attract global EV players like Tesla to set up manufacturing plants in India. Following the announcement, the shares of EV component makers such as HBL Power Systems (8.26%), Himadri Speciality Chemical (4.99%), JBM Auto Ltd (1.19%) and Exide Industries (0.06%) surged.

The policy aims to attract global EV manufacturers to invest in the Indian EV space. "The duty foregone on the total number of EVs allowed for import would be limited to the investment made or ₹6,484 crore (equal to the incentive under PLI scheme), whichever is lower," the government said in a release.

"This will provide Indian consumers with access to latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment," the government added.