India's electric car incentives limited to new investments: Officials

Incentives offered under a recently announced scheme to promote local production of electric cars will be applicable only to automakers that make fresh investments in a new manufacturing facility in India, senior government officials told ET.

Foreign firms, including those with existing facilities in India, can apply for benefits under the Scheme for Manufacturing of Electric Cars (SMEC), which allows automakers to initially import high-end electric cars at a concessional duty even as they set up local units and scale up production. But there will be no “retrospective” approval for investments that have already been made, one of the officials said.

“The investments required to be made would have to be in a greenfield facility from the date of receiving nod under the SMEC and within the next three years.” Restricting the scheme to new units would help in accurately assessing localisation of content, the official said.

“If the same facility were to be utilised for manufacturing internal combustion engine vehicles and electric cars, it would become impossible to accurately calculate the localisation content in EVs,” said another official.

The scheme, announced in March, is intended to attract investments from companies like US-based Tesla and other highend electric vehicle manufacturers. Guidelines for implementation of the scheme are being finalised and are likely to be announced in the next three months, officials in the know said.

Applications under the scheme will be called after that. Tesla, which has not announced any plan yet for investing in India, as well as others like Volkswagen-Skoda and Hyundai-Kia that have evinced some interest in the scheme but have yet to make any formal announcements will likely be eligible for incentives under the scheme.

If the benefits are limited to fresh investments under the SMEC policy, Vietnamese electric-car maker Vinfast may not be eligible, since it has already commenced construction of a facility in Tamil Nadu and announced plans to invest $500 million over five years in the country. Sector watchers, however, said the company may still become eligible if it pauses the investment till it gets approval under the SMEC scheme and completes the investment in three years after that.