3 min readNew DelhiMar 26, 2024 07:29 AM IST
First published on: Mar 26, 2024 at 05:10 AM IST
The union government will have to manage the risks of over-reliance on foreign manufacturers as supply chain dependence on China will sharply increase as tariffs on electric vehicles (EVs) were slashed under the new EV policy, think tank Global Trade Research Initiative (GTRI) has said in a report.
Fear of a rise in trade imbalance with China in the auto sector comes as nearly a quarter of India’s auto component imports already come from China and the Chinese firms manufacturing cars in India would further increase imports of most parts from China following the EV policy change announced earlier this month.
However, high tariffs have also hurt the Micro, Small & Medium Enterprises (MSME) sector currently due to difficulty in procuring parts that has had implications on exports too. India’s average tariffs are among the highest in the world which economists have pointed is among the reasons for lower competitiveness of the Indian manufacturing sector.
GTRI said that the imports could go up primarily as Chinese EVs are facing anti-subsidy investigations in the large markets such as the European Union and the US. The recent decision to lower tariffs would, therefore, be a relief for Chinese firms scouting for markets amid declining exports in the US and EU.
“India’s decision to allow Chinese car makers in India and cutting import tariffs on electric vehicles (EVs) will benefit Chinese manufacturers directly or indirectly being the dominant suppliers of EV batteries. Supply chain dependence on China will sharply increase even when non-Chinese companies ( Tesla, Vinfast) set shop in India,” GTRI said.
“Just one joint venture between SAIC Motor (owner of the MG brand) and India’s JSW Group aims to sell over 1 million new energy vehicles by 2030. The SAIC Motor Corporation Limited, is a Chinese state-owned automotive design and manufacturing company headquartered in Shanghai, China,” the report said.
The new EV policy released allows the import of completely built-up (CBU) cars at a 15 per cent import duty. Currently, the customs duty on cars imported as CBUs is 60 per cent or 100 per cent, depending on engine size and whether the cost, insurance, and freight (CIF) value is higher or lower than $40,000. Where the car costs $40,000 or more, the duty is 100 per cent; a cheaper car attracts 60 per cent. However, the maximum number of e-4W allowed to be imported at the reduced duty rate has been capped at 8,000 per year.
The automobile industry in India contributes 7.1 per cent to the country’s GDP, up from 2.8 per cent in 1992-93. The industry also accounts for over 50 per cent of India’s manufacturing GDP. It provides direct and indirect employment to over 19 million individuals.
The large-scale entry and market dominance of Chinese automakers into India will impact the domestic auto/EV manufacturers, firms working in EV value chain space, and battery development, GTRI said.
The automobile industry in India contributes 7.1 per cent to the country’s GDP, up from 2.8 per cent in 1992-93. (Representational Image) 
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