Elon Musk’s Tesla will set up the India assembly plant earlier than the three-year deadline which the government’s electric vehicle policy has laid down for global companies choosing to import their cars at concessional import duty. The company is also likely to meet the localisation content ahead of the schedule laid down by the government. Tata Group’s semiconductor fabrication plant which will come up at Dholera in Gujarat, has been identified as one of the major supplier of chips to Tesla.
Government sources said that Tesla has indicated that it will source 30-40% of chips and forging for its vehicles from India. “These two components comprises around 40-50% of what goes into making of EVs, so it makes sense for Tesla to set up its assembly plant in the country as early as possible,” sources said. Obviously, Tesla will supply chips and forgings sourced from India to its plants in US, but it makes sense to assemble the products closer to the point where the components are sourced from.
Under the EV policy, manufacturers have to achieve 25% localisation by the third year and 50% by the fifth year. Sources said that since majority of chips and forgings will be sourced from India, the company will be able to meet these deadlines ahead of the schedule.
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Under the EV policy, global automakers will be allowed to import completely built-up units (CBU) at a concessional import duty of 15% for vehicles which are priced (cost, insurance & freight) $35,000 and above for a period of five years. However, they will be required to set up manufacturing facilities in the country within a three-year period.
For companies which are not opting for this route, CBUs priced more than $40,000 will continue to attract 100% duty and those below it, at 70%.
The 15% concessional import duty is the same which is applicable for completely knocked down (CKD) units, which are assembled in the country.
Companies availing this benefit, will have to commit a minimum investment of Rs 4,150 crore ($500 million) in India – there’s no upper limit on investments.
The duty foregone on the total number of EVs permitted for import will be capped at the investment made or Rs 6,484 crore (equal to incentive under the production-linked incentive scheme). Additionally, a maximum of 40,000 EVs, at a rate not exceeding 8,000 per year, will be allowed if the investment crosses $800 million.
The scheme also requires companies to back their commitments with a bank guarantee in lieu of the custom duty forgone, which will be encashed in case of non-compliance with domestic value addition and minimum investment criteria.
Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
