Ministry of Heavy Industries approves EV policy to promote manufacturing in India

The Ministry of Heavy Industries (“MHI”), vide gazette notification dated 15 March 2024 had approved a scheme to develop India into an electronic vehicle (“EV”) manufacturing hub (“EV Policy”). The EV Policy (tenure being 5 years or as notified by the Government of India) aims to provide Indian consumers with access to latest technologies to strengthen the EV ecosystem in effect in order to increase production while lowering the cost of production of such EV’s and would further promote the Make in India initiative.

The EV policy provides certain specific key milestones to be achieved by approved applicants (as defined in the gazette notification) along with the incentives provided thereunder including but not limited to:

(i)Setting up manufacturing facilities in India with a minimum investment of INR 4,150 crore (USD 500 million), for manufacturing of e-4W;

(ii) Manufacturing facility(ies) shall be made operational within a period of 3 years from the date of issuance of approval letter by MHI and achieve minimum Domestic Value Addition (“DVA”) of 25% within the same period;

(iii) Minimum DVA of 50% within a period of 5 years from the date of issuance of approval letter by MHI;

(iv) Lower customs duty of 15% would be applicable for a total period of 5 years, from the date of issuance of approval letter by MHI; and

(v) The approved applicant’s commitment to setup manufacturing facility(ies) and achievement of DVA shall be backed by a bank guarantee from a scheduled commercial bank in India.

The EV Policy entails a detailed eligibility criteria and application process. Further, the mechanism developed for implementation of the scheme is to be through a specific project management agency.

This action of the MHI intends to boost the EV production in India and as such “lead the global transition from conventional ICE powertrain to a more efficient and decarbonized Electric Vehicle (EV) technology.”