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The government of India approved the new EV policy on 15th
March, 2024. This new scheme has been approved to boost the Make in India
initiative, which has been the top priority of the Indian Government in recent
years. The scheme will promote E-vehicle with the latest technology to be
manufactured in India, making India a manufacturing hub of E-vehicle. Before
understanding the new EV policy in detail, first, let us look at the Indian
e-vehicle market.
Indian E-Vehicle
Market
India is one of the fastest-growing automotive markets in
the world. When it comes to ranking, India is ranked as 3rd largest automobile
market in the world, with the current market size of the automotive sector as
Rs 12.5 lakh crore($ 151 billion). By 2030, the automotive sector is expected
to cross Rs 24.9 lakh crore($ 300 Billion). The automotive industry contributes
over 7.1 per cent of India's GDP growth.
As per the NITI Aayog report, EV penetration in various
categories in 2030 is likely to be as below:
Two-wheelers: 35-40 per cent
Private 4 Wheelers: 9-11 per cent
Shared 4 Wheelers: 20-25 per cent
Buses: 13-16 per cent
With Such a huge opportunity, the Indian government wants no
stone unturned to strengthen the EV ecosystem and make India a manufacturing
hub of E-vehicles. Let us now understand the government's new EV policy, which
was approved on 15th March, 2024.
Pre-requisites for
operating: Scheme Details
This scheme will mainly attract investment from Global EV
manufacturers and will promote India as a manufacturing destination for EVs on
a global map.
Manufacturing companies have to make a minimum investment of
Rs 4,150 crore($ 500 million) to set up manufacturing facilities in India.
There is no upper limit.
The manufacturing unit should be operational and ensure to
achieve a minimum of 25 per cent & 50 per cent DVA (Domestic Value
addition) within 3 and 5 years from the date of issuance of the approval letter
by MHI (Ministry of Heavy Industries), respectively.
Custom duty has been reduced from 70 per cent to 15 per cent
on EV passenger cars with a minimum CIF (Cost, Insurance, Freight) value of $
35,000 with an upper cap limit of 8000 vehicles per year. This rate will be
applicable for 5 years from the date of the issuance letter by MHI, subject to
meeting the minimum investment amount of Rs 4150 crore($ 500 million).
The duty foregone on the total number of EVs allowed for
import would be limited to the investment made or Rs 6,484 crore (equal to
incentive under the PLI scheme), whichever is lower.
The investment commitment made by the company will have to
be backed up by a bank guarantee instead of the customs duty forgone.
The Bank guarantee will be invoked in case of
non-achievement of DVA and minimum investment criteria defined under the scheme
guidelines.
Pros and Cons of the
Scheme
Pros -
The scheme will attract huge investment from Foreign EV
manufacturers (such as Tesla, Vinfast, etc.), which will boost the Indian
economy.
With global players entering the Indian market, India will
have access to the latest and cutting-edge EV technologies.
India's presence on the global map in EV space will be
strengthened.
More manufacturing units will create employment
opportunities in India.
This will boost up the Government Initiative of ‘Atmanirbhar
Bharat' and ‘Make in India'.
Auto ancillary companies in India will be major
beneficiaries.
With production happening in India, Indian consumers will be
able to afford EV cars at lower prices.
Other benefits: reduction in import of crude oil, reduction
of Air pollution.
Cons -
This scheme will intensify the competition for the vehicle
manufacturers and auto component manufacturers already existing in India.
The rebate is for new EV maker entrants only. Hence, may not
apply to earlier movers like Hyundai and Kia.
It could also potentially impact sales of luxury vehicles
(German brands) with an increased entry of mid-to-premium EVs at competitive
pricing.
Future of e-vehicles
in India
The EV sector is doing well in India, with a projected 66
per cent CAGR over the next decade. To remind you, these estimates came in
before this policy. With the introduction of this policy, the competition is
likely to increase, and we may see India achieving the above numbers sooner.
On the other hand, the adoption will largely depend on
technological advancement (which will get a boost from this policy) in charging
infrastructure, battery technologies, & EV components. EV components are
advancing on both software and hardware fronts. Charging infrastructure is
evolving, overcoming challenges with innovative solutions that are currently
under the prototype stage, like Bidirectional Charging (V2G Technology) and
Wireless Charging, reflecting a dynamic shift toward sustainability and
convenience.
It won't be wrong to say that other than the promising
trends, there are also challenges to overcome. However, with continued
government support, technological advancements, and collaborative efforts, the
future of electric vehicles in India appears bright, with the potential to
revolutionise the country's transportation landscape and contribute to its
sustainable development goals.
Opportunities for Indian e-vehicle producers
Once the new/foreign players come to India, it will expand
the EV market and kickstart the transition to EVs by bringing in proven
technology. After people feel confident of the technology, even the Indian
e-vehicle producers will benefit from an increase in demand, as we have
mentioned earlier. To take advantage of the scenario, we may see even the
legacy players pushing the gears for faster adoption.
Article
Courtesy: ICICI Direct
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INDUSTRIAL PRODUCTS FINDER (IPF) is India’s only industrial product portal. Referred to as the ‘Bible’ of the manufacturing sector in India,
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