Centre paves way for Tesla’s entry with new EV scheme, eases duty for some imports

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.
In 2021, Tesla had written to nodal central ministries seeking a reduction in import duties on fully assembled cars and had asked for duties to be cut to 40-15 per cent depending on the price of the car. The new policy effectively fulfills that demand.

“Under this scheme, EV passenger cars (e-4W) can initially be imported with a minimum CIF value of $35,000, at a duty rate of 15 per cent for a period of 5 years from the date of issuance of approval letter by Ministry of Heavy Industries (MHI),” the new EV policy said.

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 carryover of unutilised annual import limits would be permitted, the policy read. In order to avail duty concessions, the EV policy has set the minimum investment limit for manufacturers at Rs 4,150 crore.

“The manufacturing facility(ies) shall be made operational within a period of 3 years from the date of issuance of approval letter by MHI and achieve minimum Domestic value addition (DVA) of 25 per cent within the same period. The approved applicant will be required to achieve a minimum DVA of 50 per cent within a period of 5 years from the date of issuance of approval letter by MHI,” the policy said.

The government said that the scheme is intended to promote EV manufacturing in India, a sector that is expected to grow into a major category within the automobile sector in teh coming years. India is currently the world’s third largest automobile market and one of the fastest growing automotive markets in the world. The current market size of the automotive sector is Rs 12.5 lakh crore and the sector is expected to cross Rs 24.9 lakh crore by 2030. The automotive sector contributes over 7.1 per cent to India’s GDP.

Officials said India has the opportunity to lead the global transition from conventional Internal combustion engine (ICE) powertrain to a more efficient and decarbonized EV technology.