Incentive extended to facilitate local manufacturing of electric vehicles: govt

The central government said any incentive extended to facilitate local manufacturing of electric vehicles will be equal for foreign as well as domestic investors amid concerns raised by automakers in India over possible concessions in import duty to American carmaker Tesla.

Senior government officials in the know told ET Tesla has sought provisional tariff concessions as a prerequisite for setting up a manufacturing facility in India but New Delhi is not in favour of any company-specific exemptions. “The government’s approach is for the industry as a whole and not for any specific company because we have very strong domestic companies in this sector,” said an official, adding that any that incentives offered will be equal for domestic and foreign investors.

The government is in the process of drawing up a policy to incentivise local manufacturing of electric cars, at a time when American electric vehicle maker Tesla Inc and its relatively lesser-known Vietnamese rival VinFast are firming up their India entry strategy. While policy guidelines are yet to be finalised, local carmakers have raised concerns over extension of concessional tariffs to Tesla, which they said will adversely impact huge investments already made or being made by them to produce electric vehicles in the country.

A senior industry executive who did not wish to be identified said while the industry has not yet formally put forth any objections before the government, several carmakers are concerned that any reduction in import duty will result in an unfair advantage to the American carmaker which is yet to make firm investments here.

Apart from homegrown auto-majors like Tata Motors and Mahindra & Mahindra (M&M) which already produce EVs locally, among others companies like Maruti Suzuki, Hyundai-Kia have announced significant investments to set up battery/battery pack assembly plants and lined up for launch more than a dozen electric cars in the market by 2030. While Hyundai has announced investments to the tune of Rs 20,000 crore in Tamil Nadu – a major proportion of which will go towards making EVs locally, Suzuki Motor Corporation (parent of the country’s largest carmaker Maruti Suzuki) committed Rs 7,300 crore in setting up a battery plant in Gujarat in Aug 2022.

The Department for Promotion of Industry and Internal Trade (DPIIT), which operates under the aegis of the ministry of commerce & industry has been holding high-level discussions to put in place a scheme for subsidising electric four-wheeler makers linked to investments made by these companies for producing vehicles in the country. Local manufacturing, the government feels, will also boost employment generation while bringing down overall car prices. Tesla though is learnt to be pushing for lower customs on imported vehicles till the time a local factory becomes operational. Emails sent by ET to Tesla and the Ministry of Commerce & Industry seeking comments on the matter remained unanswered till Press time Sunday.Meanwhile, consultations are on to determine the threshold of investment required to be made by carmakers to avail of benefits under this new scheme.

Last week, Minister for Commerce & Industry Piyush Goyal while on his visit to San Francisco to attend the third Indo-Pacific Economic Framework (IPEF) visited Tesla’s factory in Fremont, California and engaged with senior executives at the company. In a post on social media app X, Goyal stated, “Visited @Tesla’s state of the art manufacturing facility at Fremont, California. Extremely delighted to see talented Indian engineers & finance professionals working at Senior positions and contributing to Tesla’s remarkable journey to transform mobility. Also proud to see the growing importance of Auto component suppliers from India in the Tesla EV supply chain. It is on its way to double its components imports from India. Missed Mr @ElonMusk’s magnetic presence and I wish him a speedy recovery.” Goyal, however, had clarified that no decision has been taken regarding the carmaker’s entry into the Indian market.

In June, following a meeting with Prime Minister Narendra Modi in New York, Tesla CEO Elon Musk had said his company could soon be setting up a manufacturing base in India. “I am confident that Tesla will be in India… as soon as humanly possible,” Musk had said then, changing stance from about a year ago when the carmaker had said that the levies imposed by India on automobiles are the highest among large countries, and that it can only consider setting up a factory locally if it succeeds with imported models.

Senior government officials said an initial round of discussion has taken place with executives from Tesla recently. “Where ever Tesla sets up a base, it does so with its entire supplier base. So, the investments are significant. They already source from some component makers here,” said a person aware of developments. Tesla is, in fact, looking to source $1.7-1.9 billion worth of auto parts from India this year, up from $ 1 billion in FY23.

Tesla currently has two vehicle manufacturing facilities outside United States; one near Berlin (Germany) and another in Shanghai (China).


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