INTRODUCTION

India's new Electric Vehicle (EV) policy signifies a pivotal step towards advancing the nation's mobility landscape while addressing environmental challenges. Designed to incentivize EV adoption, the policy offers subsidies, tax exemptions, and infrastructure support, aiming to accelerate India's transition to cleaner transportation. 

Importance

1. Equal Opportunity: The new EV policy aims to create a level playing field for both new entrants like Tesla and existing automakers, ensuring fair competition in the EV market.

2. Encouraging Investment: By allowing greenfield investment commitments from all companies, the policy promotes increased investment in the Indian EV sector, fostering growth and innovation.

3. Economic Growth: The automotive sector is a significant contributor to India's GDP, and advancements in the EV segment are crucial for sustained economic development.

4. Addressing Global Demands: By fulfilling demands for tariff concessions from global EV manufacturers like Tesla, Inc., the policy attracts foreign investment and technology transfer.

5. Alignment with Government Vision: The policy supports the government's vision to position India as a leader in the global transition towards cleaner transportation solutions.

Details

• Greenfield Investment: Existing automakers can make greenfield investments under the new policy, addressing concerns of preferential treatment.

• Consultation Process: The Ministry of Heavy Industries (MHI) is finalising guidelines through industry consultations, with Tesla participating for the first time.

• Import Duty Norms: The policy reduces import duties on completely built-up (CBU) EVs from 100% to 15%, with a minimum  cost, insurance, and freight (CIF) value of $35,000 for EV passenger cars (e-4W). This is for manufacturers investing at least Rs 4,150 crore in India.

• Operational Requirements: Manufacturing facilities must be operational within 3 years and achieve minimum Domestic Value Addition (DVA) targets of 25% within 3 years, escalating to 50% within 5 years from the date of issuance of approval letter by the Ministry of Heavy Industries.

• Import Limits: EV passenger cars can be imported at reduced duty rates with a cap of 8,000 units per year, with provisions for carryover of unutilized limits.

Current and future potential of EV in India

• Market Size: India is the world’s third-largest automobile market, with the automotive sector valued at Rs 12.5 lakh crore, expected to grow to Rs 24.9 lakh crore by 2030.

• Example: From January to March 2024, 14,384 e-vehicles were registered in Delhi, indicating a growing trend. In 2023, a total of 73,647 e-vehicles were registered.

• GDP Contribution: The automotive sector contributes over 7.1% to India’s GDP, highlighting its economic significance.

• Growth Opportunities: The rapid expansion of the EV market presents substantial growth opportunities for domestic and international automakers.

• Export Opportunities: The scrutiny of Chinese EV exports arises from suspicions of unfair trade practices, including illegal subsidisation, which could distort the global market. This presents an opportunity for India to position itself as an alternative manufacturing hub for EVs

• Environmental Concerns: EVs address environmental sustainability concerns, making them a crucial component of India's future mobility solutions.

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

Issues with the policy and ev sector in India

• Level Playing Field Concerns: Existing automakers were initially worried that the new EV policy favoured new entrants like Tesla.

• Implementation Challenges: Effective implementation of reduced import duties and investment commitments requires clear guidelines and robust monitoring.

• Chinese Investment Filter: India's policy to restrict Chinese investments in critical sectors, including the EV sector, poses challenges for potential foreign investments.

• Example: India reportedly rejected a proposal in June 2023 from Chinese company BYD to build a $1 billion EV plant in partnership with Hyderabad-based Megha Engineering and Infrastructures Ltd

• Infrastructure Challenges: Lack of charging infrastructure and range anxiety hinder widespread adoption of EVs.

• Affordability: Despite incentives, EVs remain relatively expensive compared to conventional vehicles, limiting consumer uptake.

• Subsidy Reduction: The Indian government's reduction of subsidies on electric two-wheelers from 40% to 15% may hinder EV adoption, affecting budget-conscious consumers and potentially stalling India's target of 30 million electric vehicle sales by 2030. 

• Regulatory Hurdles: Complex regulatory processes and uncertainty in policy implementation create barriers for manufacturers and consumers alike.

• Import Dependency: Historically, India has relied on imports for EV components, highlighting the need for domestic production and self-reliance in the sector.

Schemes 

1. Faster Adoption and Manufacturing of Electric Vehicles in India (FAME India):

1. This is the flagship scheme for promoting electric mobility in India. 

2. It was launched in 2015 and is currently in its second phase (FAME II), which offers demand incentives for electric vehicles (two-wheelers, three-wheelers, four-wheelers, buses) .

3. FAME II sanctioned  2,877 Electric Vehicle Charging Stations in 68 cities across 25 States/UTs and 1,576 charging stations across 9 Expressways and 16 Highways.

2. Production Linked Incentive (PLI) Scheme for Automotive Sector: 

1. This scheme was launched in 2021 with the aim of attracting investments in the domestic manufacturing of electric vehicles and auto components. 

2. It offers financial incentives of up to 18% to companies that set up manufacturing facilities in India.

3. PLI Scheme for Advanced Chemistry Cell (ACC): This scheme was also launched in 2021 with the aim of promoting the domestic production of lithium-ion batteries, which are a key component of electric vehicles.

4. Electric Mobility Promotion Scheme (EMPS):

1. Ministry of Heavy Industries launched EMPS with an outlay of Rs. 500 crore.

2. Aims to promote electric two-wheelers and three-wheelers including registered e-rickshaws & e-carts for four months, from April 1 to July 31, 2024.

Way forward

• Clarify Guidelines: Finalise and disseminate clear guidelines to ensure all stakeholders understand the policy’s provisions and requirements.

• Promote Domestic Manufacturing: Encourage both new and existing automakers to establish manufacturing units in India to boost local production and reduce dependency on imports.

• Enhance Infrastructure: Invest in developing EV infrastructure, including charging stations and battery manufacturing, to support the growing EV market.

• Example:  India is pushing for battery production through the production-linked incentive (PLI) scheme for advanced chemistry cell (ACC) battery storage which is a crucial component of lithium-ion batteries.

• Collaboration: Foster collaboration between government, industry stakeholders, and academia to address challenges and unlock the full potential of the EV market in India.

• Monitor Implementation: Establish a robust framework for monitoring the implementation of the policy, ensuring compliance and addressing any emerging issues promptly.

• Public Awareness Campaigns: Increase awareness about the benefits of EVs and available incentives to boost consumer confidence and adoption rates.

  
  

  Short Takes

  CBU EV: Stands for Completely Built-Up Electric Vehicle.This refers to a vehicle that is fully assembled and ready to drive upon import. No further assembly is required in the destination country.

  CIF : Cost, Insurance ,Freight(CFI) value in international trade combines the cost of the goods itself, insurance during transport, and freight charges to get the landed cost at the destination port. This total value is used to calculate import duties and helps businesses plan costs and pricing.

  DVA:  Stands for Domestic Value Addition. In the context of the Indian Electric Vehicle Policy, it refers to the percentage of value a product gains through manufacturing processes within India.

CONCLUSION

As India's new Electric Vehicle (EV) policy unfolds, it presents a promising opportunity to reshape the country's automotive industry and reduce carbon emissions. With increasing EV registrations and investments in charging infrastructure, India is poised

Tags:
Polity

Keywords:
EV (FAME India) Production Linked Incentive (PLI) Scheme