India Unveils New Electric Vehicle Policy to Boost Foreign Investment and Expand EV Market

India's new EV policy aims to boost foreign investment and domestic EV industry by offering concessions for global EV makers who commit to local manufacturing. This could attract major players like Tesla and VinFast, accelerating India's EV adoption.

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Rafia Tasleem
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India Unveils New Electric Vehicle Policy to Boost Foreign Investment and Expand EV Market

India Unveils New Electric Vehicle Policy to Boost Foreign Investment and Expand EV Market

India has introduced a new electric vehicle (EV) policy aimed at attracting foreign investment and expanding the EV market in the country. The policy offers concessional tariffs for limited volumes of imports by global EV manufacturers, but with the condition that they commit to a minimum investment of $500 million in India and meet strict localization targets of 25% by the third year and 50% by the fifth year.

The government is confident that this policy will make the market accessible to more global players, including companies like Vietnam's leading EV maker VinFast, which has already announced plans to invest $500 million in India over five years. While Tesla CEO Elon Musk has expressed enthusiasm about the future of India's EV market, he recently postponed a scheduled trip to meet Prime Minister Narendra Modi. The government remains optimistic that the new policy will create a more equitable environment and attract major players like Tesla.

Why this matters: India's new EV policy has the potential to significantly boost foreign investment in the country's electric vehicle market and accelerate the adoption of EVs. The policy's localization targets and investment requirements aim to create a more robust domestic EV industry and reduce India's dependence on imports.

India's EV sales are expected to nearly double in 2023 and reach 4% of total passenger vehicle sales, with the government aiming for 30% EV usage by 2030. The policy also aims to boost EV adoption in the two-wheeler and three-wheeler segments, where India already has one of the highest penetration rates globally.

In the first quarter of 2024, the Indian electric vehicle market experienced notable growth, with Battery Electric Vehicles (BEVs) accounting for 2.6% of total passenger vehicle sales and Hybrid Electric Vehicles (HEVs) making up 2.5%. The Tata Punch EV emerged as the standout BEV model, while Toyota's Innova Hycross led the HEV category. Tata maintained a dominant 68% share in the BEV market, while Toyota held an 87% market share in HEVs.

The quarter also saw aggressive price adjustments, with MG, Tata, and Mahindra reducing prices of their EV models. A significant policy update came after lobbying by Tesla, leading to a reduction in custom duties for EVs, conditional on investment and local factory establishment.

The Indian government's new EV policy is expected to attract not only Tesla but also other foreign automakers, such as Vietnam's VinFast, which has already announced plans to invest $500 million in an integrated EV manufacturing facility in India's Tamil Nadu state. Hyundai Motor Group, comprising Hyundai and Kia, has also announced plans to launch their first India-manufactured EVs by 2025, with production set to begin by the end of 2024. By 2030, Hyundai and Kia intend to introduce five new electric models in the Indian market.

Key Takeaways

  • India's new EV policy offers concessions to attract $500M investment and 50% localization.
  • EV sales in India expected to nearly double in 2023, reaching 4% of total passenger sales.
  • India aims for 30% EV usage by 2030, boosting adoption in 2/3-wheelers.
  • Tata dominates BEV market, Toyota leads HEVs; price cuts by MG, Tata, Mahindra.
  • VinFast, Hyundai-Kia to invest in India's EV manufacturing, targeting 5 new models by 2030.