Here, I will discuses the Indian’s government new Electrical vehicles policy 2024 and should Tata & Mahindra worried about Tesla. The wheels of the automotive industry are turning toward a greener future, and electric vehicles (EVs) are at the forefront of this revolution. As countries worldwide strive to reduce emissions and combat climate change, India has taken a significant step by unveiling its Electric Vehicle policy in 2024. This policy has conveyed India’s strong will to open its “EV automotive industry” before the world.
The international electric vehicle (EV) powerhouse, Tesla, has been eyeing the Indian market for some time now, will not miss this golden opportunity, experts all around the globe confirms this.
This has sparked a wave of apprehension among home-grown EV manufacturers like Tata Motors and Mahindra & Mahindra. These industry giants have been lobbying for a ‘level playing field’ to ensure their investments and market positions aren’t jeopardized. But should these companies really be concerned about Tesla’s entrance? Let’s delve into this hot topic.
We have discussed the Indian’s government new Electrical vehicles policy 2024 in our previous post. We are briefing here the main points for the “New” readers,
In brief, the Indian government is ready to offer tax deductions (import tax) on certain “EV” vehicles for the manufacturers that promise to invest at least 450 crore ($500 million) investment and install domestic EV manufacturing facilities in India.
To take advantage of the latest “EV-Policy”, any global “EV-makers” must meet the following clauses.
- A minimum investment of $500 million with no upper limit.
- A maximum three-year timeline for establishing manufacturing facilities and starting commercial production of EVs in India.
- Attaining a 50% “DVA” (domestic value addition) within five years of starting operations.
- A 25% localization level by the third year.
- Vehicles of a minimum CIF value of $35,000 (Rs 29 lakh) will be charged a 15% customs duty (as applicable to CKD units) for five years.
- The customs duty foregone on the total number of EVs permitted for import would be limited to the investment made or Rs 6,484 crore (equal to incentive under the PLI scheme) whichever is lower. A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is $800 million (Rs 6,664 crore) or more. The “carryover” of unutilized “yearly” import limits would be allowed by this policy.
- A Bank guarantee is needed for the investment commitment made by the company.
- The bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
Tesla’s interest in the Indian market isn’t a secret. The company’s CEO, Elon Musk, has often expressed his intention to set up a manufacturing base in India to produce a more affordable variant for the domestic and export markets. Tesla has also been pushing for lower import duties on electric cars to make their vehicles more competitive in the Indian market.
Tesla’s impending entry into India has sent ripples through the automotive sector. With its reputation for cutting-edge technology, performance, and brand allure, Tesla poses both a challenge and an opportunity. Here’s why:
- Competition: Tesla’s Model 3, Model S, and Model X have garnered global acclaim. Their arrival in India could disrupt the status quo, compelling local manufacturers to up their game.
- Infrastructure: Tesla’s Supercharger network and battery technology are unmatched. As they set up charging infrastructure across India, it could accelerate the adoption of EVs.
- Investor Sentiment: Tesla’s presence could attract foreign investment and boost confidence in the Indian EV market. However, it might also divert funds away from existing players.
But what about our home-grown manufacturers?
Tata Motors and Mahindra have voiced their apprehensions regarding the reduction of import duties on electric vehicles. They argue that maintaining a level playing field is critical for the growth of the Indian EV industry. Anish Shah, Managing Director of Mahindra, emphasizes the need to build a robust industry within India rather than merely becoming importers of EV products. These automakers fear that lowered import taxes could dent their “market share” and hamper future fundraising efforts.
The Indian government also has maintained a delicate balance for the “Indian” EV-makers.
The Policy Tightrope Walk
The Indian government’s policy strikes a delicate balance. While offering concessions to global players, it ensures stringent norms for value addition and limits imports. Only 8,000 imported cars per company per year, with a maximum cap of 40,000, will be allowed. This cautious approach aims to protect domestic manufacturers while encouraging foreign investment.
Despite these concerns, the Indian government is considering various options, including temporarily reducing import duties for certain periods. They argue that the goal is to “kick-start” four-wheeler EV manufacturing in India by bringing in proven technology and creating a competitive framework for domestic manufacturers to grow. The government’s balanced EV policy aims to boost the Indian electric vehicles market with import duty concessions for global players like Tesla while ensuring stringent norms and limited imports to benefit domestic manufacturers.
Indian EV Market: Tata & Mahindra worried about Tesla
India is currently the world’s fifth-largest car market and is expected to climb two notches by 2020. Despite being in a “budding” stage, the EV segment in India has experienced significant growth. In 2016, India sold four million cars, with only 82,000 being electric vehicles. However, this figure rose by 115% compared to the previous year, indicating a growing interest in EVs among Indian consumers.
Tata, Mahindra, and the Road Ahead
Adapt or Perish
Despite the apprehension, Indian automakers shouldn’t view Tesla’s entry solely as a threat. Instead, it could be seen as an opportunity to accelerate the adoption of EVs in India. Increased competition is likely to push other EV brands to improve their products and price them more competitively. Moreover, Tesla’s entry could also lead to the introduction of advanced EV technology in the Indian market, thereby providing a boost to the local EV industry.
Tata and Mahindra must act swiftly, but with a foolproof plan, in response to the shifting landscape. Here’s their roadmap:
- Innovation: Invest heavily in research and development to create competitive EVs. Collaborate with start-ups and harness India’s engineering talent pool.
- Localization: Focus on local manufacturing, source components domestically, and create employment opportunities. A robust supply chain is non-negotiable.
- Strategic Partnerships: Forge alliances with global players. Joint ventures can expedite technology transfer and enhance market penetration.
The Indian EV market is at a crossroads. While Tesla’s entry brings excitement, Tata, Mahindra, and other Indian automakers must rise to the challenge. The policy’s intent is clear: boost the industry while safeguarding local interests. As the wheels turn, the road ahead promises both hurdles and opportunities. Buckle up; the EV race has just begun! 🚗🔌
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