India’s Electric Vehicle Policy: Boosting EV Growth

The Union Government of India has approved a new Electric Vehicle (EV) policy aimed at positioning India as a manufacturing hub for electric vehicles with cutting-edge technology. This policy is designed to transform India’s EV market, attract investments from global EV manufacturers, and help reduce the country’s dependency on crude oil while promoting sustainability.

Key Points of the Electric Vehicle Policy

• The policy is crafted to attract investment in the electric vehicle sector by well-known global manufacturers, enabling India to be at the forefront of EV technology.
• It promises to bring the latest EV technologies to Indian consumers, strengthen the Make in India initiative, and foster healthy competition among EV manufacturers in the country.
• The policy aims to drive high-volume production, achieve economies of scale, lower production costs, reduce crude oil imports, and reduce the trade deficit.
• The EV policy will also have significant environmental benefits by reducing air pollution in cities, leading to a positive impact on public health and the environment.
• The Project Management Agency (PMA) will oversee the policy’s implementation, ensuring smooth execution and providing necessary support to EV players.
• The policy’s tenure is set for 5 years, or as notified by the Government of India.

Features of the Electric Vehicle Policy

• Minimum Investment: Rs 4150 Cr (~USD 500 Million).
• No Limit on Maximum Investment: The policy encourages companies to make large-scale investments in the EV space.
• To promote local EV manufacturing, companies must set up operational facilities within three years and achieve a minimum domestic value addition (DVA) of 25% within the same period, escalating to 50% within five years from the date of the approval letter by the Ministry of Heavy Industries.
• The policy reduces the customs duty rate to 15% for completely knocked down (CKD) units of electric vehicles with a minimum CIF value of USD 35,000 or more, for a period of 5 years, provided the manufacturer sets up manufacturing facilities in India within 3 years.
• Duty foregone on EV imports will be limited to the total investment made or Rs 6484 Cr (equal to the incentive under the PLI scheme), whichever is lower.
• If the investment exceeds USD 800 Million, manufacturers can import up to 40,000 EVs, with a limit of 8,000 EVs per year.
• Companies can carry over unused annual import limits.
• The investment commitment by the company must be backed by a bank guarantee, which will be invoked if the company fails to meet the required DVA or investment criteria.

Electric Vehicle Market in India

The new policy will likely attract global players such as Tesla, boosting India’s competitiveness in the global electric vehicle market. India is currently the third-largest automobile market in the world and one of the fastest-growing, making it a prime destination for EV investments.

The Indian electric vehicle market is experiencing rapid growth, with EV sales surging by over 45% in 2024 despite regulatory changes. By the end of 2023, total EV registrations in India surpassed 1.5 million units, showing a significant increase from just over 1 million in the previous year. This surge has elevated India’s EV market penetration to 6.3%, indicating strong momentum in EV adoption.

Government Initiatives to Support Electric Vehicles

India has introduced several policies to further promote the adoption of electric vehicles and support the growth of the EV ecosystem:

1. Amendments to the Model Building Bye-laws (2016): These amendments require 20% of parking spaces in residential and commercial buildings to be allocated for EV charging stations.
2. National Mission on Transformative Mobility and Battery Storage (2019): Aims to create an ecosystem to support the widespread adoption of electric vehicles and encourage the establishment of large-scale battery manufacturing plants.
3. Production Linked Incentive (PLI) Scheme (2021): This scheme incentivizes EV and component manufacturing in India, offering financial support to domestic and international manufacturers.
4. Vehicle Scrappage Policy (2021): Offers incentives for scrapping old vehicles and purchasing new electric vehicles.
5. Ministry of Power’s Guidelines: The guidelines mandate the establishment of charging stations every 3 km in cities and every 25 km along highways to promote easy EV adoption.
6. Phased Manufacturing Programme (PMP): This program promotes indigenous manufacturing of electric vehicles and their components.
7. Electric Mobility Promotion Scheme (EMPS) 2024: Aimed at boosting the adoption of electric two-wheelers (e2W) and three-wheelers (e3W) in India, the EMPS has a budget of Rs 5 billion and will replace the previous FAME-2 scheme.

Global Perspective on Electric Vehicles

Globally, China is a dominant player in the electric vehicle market. In 2023, BYD, China’s leading EV manufacturer, became the largest EV seller, selling 3.2 million cars. Lithium batteries, a crucial component in EVs, account for 40% of the total EV cost. China controls over 55% of the world’s lithium battery production, and its dominance in rare earth minerals like lithium and cobalt further solidifies its position in the global EV market.

Conclusion

India’s electric vehicle policy is a significant step toward transforming the country into a global electric vehicle manufacturing hub. With strong incentives for both domestic and international players, the policy is expected to drive growth in the EV sector, reduce carbon emissions, and create new economic opportunities. As EV adoption continues to rise, India’s automotive landscape is set to undergo a major transformation, contributing to a greener and more sustainable future.

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