Source says India is expanding incentives for electric vehicle manufacturing after Tesla disappointment

Last updated:November 30, 2024 11:49 IST

India’s electric car policy was originally designed to encourage Tesla to enter the market and produce locally, but the US automaker backed out of those plans earlier this year.

Representative image. (archive photo)

India plans to extend electric vehicle incentives to automakers that build models at existing factories in the country, rather than limiting the benefits to automakers willing to build new plants, a person with direct knowledge of the matter said.

India’s electric car policy, still being drafted, was originally intended to encourage Tesla to enter the market and produce locally, but the US automaker backed out of those plans earlier this year.

Other foreign automakers have shown interest in producing electric vehicles at existing and new factories in India, according to minutes of a meeting with India’s heavy industries ministry seen by Reuters. It is hoped changes to the policy will encourage electric investment from companies such as Toyota and Hyundai, the source said.

Under the policy announced in March, an automaker that invests at least $500 million in manufacturing electric vehicles in India and sources 50% of components locally will be eligible for a huge cut in import taxes – a cut to 15% from up to 100% for up to 100% 8,000 electric cars per year.

The government will now also consider investing in electric vehicles at existing factories that currently build gasoline-powered and hybrid cars, said the source, who was not authorized to speak to the media and declined to be named.

However, the electric models would have to be built on a separate production line and meet local procurement criteria, the source said.

In the case of a new factory, investments in machinery and tools to build electric vehicles would be fully counted toward the $500 million need, even if the equipment is also used to make other types of vehicles, he said.

To ensure automakers are treated fairly, the government will set a minimum electric vehicle sales target for a plant or production line that must be achieved to qualify for the program, he said.

He added that the policy will be finalized by March.

According to minutes of the meeting, Toyota officials asked whether the electric car policy would allow investment in a separate assembly line within a plant that produces multiple powertrains. They also wanted to clarify whether the manufacturing and installation of charging stations would be counted as part of the $500 million investment requirement.

Toyota and the Ministry of Heavy Industries did not respond to Reuters’ requests for comment.

Hyundai asked whether the money spent on research and development could be counted as part of its $500 million investment requirement, the minutes show. The source said it would not be counted.

Hyundai Motor India is waiting for final policies and guidelines to be rolled out, a spokesperson said.

Volkswagen’s India unit wanted more flexibility in the investment period. It asked whether 75% of the $500 million could be invested in the first three years of the five-year program, rather than the current requirement of 100%. They also wanted to clarify whether investments from suppliers were an option, as the minutes show.

Volkswagen said it is examining the latest electric car policy “in detail” and will evaluate a way forward accordingly.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)