India's new EV Policy: Import Duty at 15% for CKD

To boost EV production in India, the Indian Government has reduced the import duty for completely built units (CBUs) EVs from 70-100% (depending on engine size, and cost, insurance, and freight [CIF] value) to 15%. This shall make imports much easier for brands like Tesla. But it’s not as simple as it sounds. The Indian government has put a condition to attract investments from those brands who want to import and sell their EVs in India.

The Policy and its Mandates

The highlight of this policy is that the government has reduced import duty to 15% on EVs (for CKD units) for 5 years. But there is a catch. A vehicle having a CIF value of over $35,000 (around Rs 29 lakh) can benefit from the 15% import duty. 

Currently, the CBU vehicles attract a whopping 100% import duty if the CIF value crosses $40,000, while 70% for vehicles priced less than $40,000. 

There also is a limit on the import volume, only a maximum of 8,000 vehicles can be imported in a year. The manufacturers can also benefit from carrying over the unutilized annual import limit.  

However, the policy further states that the brand importing vehicles will be bound to set up a local manufacturing wing by investing at least $500 million (approx Rs 4150 crore) and achieve 25% localization (Domestic Value Addition/DVA) within 3 years. By the 5th year, the localization must reach 50%. 

Lastly, the potential investor(s) should furnish bank guarantees so that it serves commitment, compliance and financial security system. The bank guarantee, however, will be invoked if the DVA (domestic value addition) and investment criteria are not met. 

This is a smart move by the Indian government that is symbolically a win-win situation since it will boost foreign automotive-oriented investments and localisation in India.

Tesla’s entry soon?

The Tesla-owner, Elon Musk has made multiple public announcements on how he would love to sell Teslas in the Indian market but the high import duties are keeping his hands tied. Given this import duty scheme, this may increase the potential of Tesla to arrive in India.

There is no response from Tesla, as of now. But do stay tuned for further updates.