Key highlights
- EV import duty reduced from 110% to 15%
- Only applicable to products priced above $35,000 (Rs 30 lakh)
- Manufacturers must set up local facilities to support the domestic market
After a long thread of discussions and various finalising phases, the Indian government has finally reduced the import duty on EVs from 110% to 15%. However, the new scheme comes with certain caps, which we have explained below.
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EV import duty reduced – SPMEPCI scheme details
The Indian government has rolled out the new SPMEPCI (Scheme to Promote Manufacturing of Electric Passenger Cars in India), which offers import tax reduction on EVs from 110% to 15%.
While the new EV import scheme encourages global makers to enter the Indian market, there are various criteria and caps that each maker will have to abide by.
First, the manufacturers must generate a turnover of Rs 2,500 crore by the second year, Rs 5,000 crore by the fourth year, and Rs 7,500 crore by the fifth year.
Moreover, manufacturers with an annual turnover of more than Rs 10,000 crore with fixed assets of Rs 3,000 crore are only eligible to apply for this scheme.
Additionally, only products priced over $35,000 USD (Rs 30 lakh) are subject to the reduced EV import tax rates. Moreover, manufacturers can import up to 8,000 units annually, with the leftover quota being added to the next year’s quota.
The maximum benefit from the EV import has been capped at Rs 6,484 crore, or the actual investment by the manufacturer.
Meanwhile, every manufacturer also needs to meet the local targets. These include opening local production by the third year, and achieving localisation by 25%, which shall be increased to 50% by the fifth year.
Speaking of the investments, a manufacturer can set up R&D plants, manufacturing and production of tools. Additionally, up to 5% of the actual investment is allowed to be spent on the charging infrastructure and 10% on land and factory.
Our verdict
The new SPMEPCI scheme is a big step from the Indian government to invite global manufacturers to India to create an EV hub. However, the policy has strict rules, which are likely to prove financially feasible for a select makers.