If Sunjay Kapur, head of one of the biggest auto component manufacturers in the country (and a former chief of the component makers’ industry association ACMA) is raving about the Centre’s new electric vehicle (EV) policy announced this weekend, calling it a “pivotal moment” and a “forward thinking” policy, there is a reason for it.
In the meantime, though, you should just rein yourself in from dreaming of zipping around in dirt-cheap Tesla Model 3’s in India as the hype and headlines would make you believe.
This is because, on paper, the new EV Policy spearheaded by the Dept for Promotion of Industry and Internal Trade (DPIIT) and launched by the ministry of heavy industries on Friday evening, checks all the boxes when it comes green flagging the imminent arrival of Tesla into India – first its snazzy electric cars getting imported at merely 15 per cent import custom duties (compared to the existing 70 per cent), and then it all leading to a vibrant domestic ecosystem of electric vehicle manufacturing in the country.
Reality could just be a tad different, and in a best-case scenario, at least delayed. Setting up a domestic manufacturing plant would take more than a government policy or an incentive of duty cuts – it would invariably have to pass the ‘chicken-and-egg’ test that has dogged the adoption of electric mobility in the country all this while. ‘If you get a car, what about the charging infra?’ on the demand side, and ‘if you set up a manufacturing plant, what about the availability of components’ on the supply side.
The new policy has slashed duties on electric cars being imported into India from 70 per cent to 15 per cent, similar to rival hubs like China (though duties are lesser in the US and Euro Zone), but there are three caveats to availing it. One is that the companies have to set up manufacturing of their vehicles within 3 years of starting the import at an investment not less than around 4,000 crore rupees, and secondly, they have to achieve localisation levels of at least 50 per cent within 5 years (meaning, the parts that go into making the cars in India have to be components made locally in India before being assembled here, and not just imported to be assembled in the local plant).
Thirdly, and one that could dampen your Tesla dreams, is the price limit of vehicles that can be imported thus. They have to be priced around 30 lakh rupees and above on import – which means that once you add in the 15 per cent import duty and other road tax etc, the actual on road price would be easily around 40 lakh rupees.
Presently, excluding some value-for-money models from domestic giant Tata Motors which anyway are primarily used as cabs, most EV models in the market are way costlier, the options being a handful from mid-market brands Hyundai and MG Motor, as well as luxury makers like BMW and Mercedes-Benz.
So, while Tesla seems most likely to grab the offer from the government—after all, they had publicly made the duty cuts as their condition for selling in India earlier, including when Prime Minister Narendra Modi met with Tesla chief Elon Musk in the US back in June last year—and may start importing cars closely followed by an assembly line in the country, probably in Gujarat, it is unlikely the numbers would be big enough.
For example, Hyundai’s ioniq 5, promoted by Shah Rukh Khan and having a price range closer to what the cheapest Tesla model in India would cost, sold just 66 cars last month in the country. Evidently, an electric revolution where green number plates abound on our streets would have to wait.
Instead, one more likely offshoot in all this would be to the ‘egg’ rather than the chicken — a fillip to the ancillary businesses, setting up of charging infra, as well as an increased adoption of electric cars in the ride hailing sector. Anyone from component manufacturers to battery makers would be enthused to set up, or expand, their capacities, anticipating the future domestic manufacturing of electric cars in the country (Besides Tesla, Vietnam’s VinFast had also evinced interest in setting up a plant in India).
For example, VG Anil, CEO of ArenaQ, a storage solutions maker, said, “We are excited at being part of India’s electric mobility project within the three years specified by setting up our factories and starting mass production of EVs.” He added that “by encouraging investments and stressing on the importance of indigenous production (the EV Policy) bolsters employment opportunities as well as economic development.”
Mayank Bindal, founder & CEO of Snap, an electric cab startup, also gave his thumbs up. "We envisage this policy propelling innovation, growth and job opportunities in the EV sector. It not only strengthens supply chain but also firmly establishes India’s position as a global hub for EV manufacturing through incentives for investment and domestic manufacture,” he said.