Extending the policy
The government is looking to expand the scope of its electric vehicle (EV) policy, announced in March, to include a retrospective effect.
This means that the policy, that endeavours to prompt global players to localise production and invest in the domestic ecosystem, will now extend benefits to entities who have already made their investments.
Earlier, entities were eligible for incentives only if they set up local facilities within three years of receiving approval.
The policy announced in March aimed to provide Indian consumers with access to the latest technology and strengthen the EV ecosystem by encouraging healthy competition among EV players by attaining higher volumes of production, economies of scale and lower cost of production.
All in all, better the electric vehicle economics for Indian consumers, and in a commercially viable manner for the ecosystem.
The policy also mandated that half of the value addition in the overall manufacturing be done domestically within five years.
To maintain commercial viability and retain a foothold in the Indian market, the import duty on EVs as completely built units (CBUs) with a minimum cost, insurance, and freight (CIF) value of $35,000 was reduced from 70%-100% to 15%
A Niti Aayog report in 2022 argued that purchasing a vehicle is a “major investment decision” for most Indian consumers.
Thus, it was essential to ensure viable economics for owning, as well as maintaining and running the same – the total cost of ownership.
The other essentiality for a comprehensive ecosystem stems from the observed experience of after-sales service
The report also held that India would require “significant investor support” to realise the $100 billion-plus EV opportunity
The International Energy Agency (IEA)’s Global EV Outlook for 2024 pointed out that electric cars remain 10% to 50% more expensive than combustion engine equivalents in Europe and the U.S., depending on the country and car segment.
Notably, Europe and the U.S. meet 20% and 30% of their EV battery demands through imports, according to the report.
This also forms a case for the necessity for integrated production lines.
Ahead
If FDI is to reap its potential fully, the focus must be on ensuring that it is towards building a core country, such that the critical components are made here, there is the transfer of technology and local manufacturing is built here
If FDI does not enable one to be a core country, we will not be to progress towards an enabling capacity to establish ourselves as a core player.
Instead, you shall stand inserted as a peripheral player in the larger supply manufacturing chain
COMMENTS