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By when can India indigenise electric vehicle production

Economy02 Apr 2024| A-AA+

In News

  • The Union government  recently approved a policy to promote India as a manufacturing hub for electric vehicles (EVs).
Policy guidelines
  • The policy broadly clears the path for global EV makers like Tesla and Chinese EV maker BYD to foray into the Indian markets.
  • The central goal of this policy is to enable transitioning to localised production in a commercially viable manner and plan as per local market conditions and demand.
  • The most significant provision is the reduction of import duty on electric vehicles imported as a completely built unit (CBU) with a minimum cost, insurance and freight (CIF) value of $35,000 to 15% from the present 70%-100%
  • The Indian government has been of the view that lowering duties might encourage import dependence, without leading to technology and production transfers.
  • The policy also stipulates that a total duty of ₹6,484 crore or an amount proportional to the investment made — whichever is lower— would be waived on the total number of EVs imported.
  • It must be noted that, a maximum of 40,000 EVs can be imported under the scheme at not more than 8,000 units a year, provided the minimum investment made is $800 million. Carryover of unused annual imports limits is permitted.
  • Overall, the minimum investment cap for eligibility has been set at $500 million (approximately ₹4,150 crore).
  • Another important aspect of the scheme is localisation targets. Manufacturers have three years to set up their manufacturing facilities in India.
  • They are expected to attain 25% localisation by the third year of incentivised operation and 50% by the fifth year. For clarity, it is the domestic value addition as part of the larger manufacturing process which must attain the stipulated targets.
Challenges
  • Global players setting up shop in India must consider local circumstances, like the environment, roads, driving behaviour and usage conditions. “Indian customer expectations are very challenging and very price sensitive.
  • While penetration in the two-and three-wheeler segment has been significant, passenger vehicles have seen only a 2.2% contribution thus far.
  • This is mainly due to lack of proper charging infrastructure, range anxiety, and limited number of products in the affordable range due to limited localisation.
  • The Confederation of Indian Industry (CII) in a July 2023 report had observed that India may require at least 13 lakh charging stations by 2030 to support “aggressive EV uptake.
  • Nine cities with a population of more than 4 million — Delhi, Mumbai, Pune, Ahmedabad, Surat, Bengaluru, Chennai, Hyderabad and Kolkata— would each require 18,000 public charging stations by 2030.
  • Five years is a sufficiently long-time frame to achieve 50% localisation.
  • Also, the reduction in custom duty on import of completely built units for testing and market trials would help global players accelerate the development process with reduced risk.
Source- The Hindu