NEW EV POLICY (Syllabus: GS Paper 3 – Environment)

News-CRUX-10     18th May 2024        

Context: Recently, centre government clarify that all auto companies can make investments under EV policy.

New Electric vehicle policy:

  • Aim: To promote the country as a leading manufacturing destination for EVs and attract investments from global EV makers.
  • Provisions:

o Three-Year Establishment Window: A three-year grace period provided for establishing local manufacturing units for EVs. Currently, India imposes hefty taxes ranging from 70 per cent to 100 per cent on imported cars, depending on their value.

o Domestic Component Stipulation: Requirement for at least 25% of components to be domestically sourced.

o Minimum Investment required: Rs 4,150 crore ($500 million).

o Maximum Limit: No limit on Investment.

o Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e-vehicles, and reach 50 per cent domestic value addition (DVA) within 5 years at the maximum.

o Domestic value addition (DVA) during manufacturing: A localisation level of 25 per cent by the 3rd year and 50 per cent by the 5th year will have to be achieved.

o Custom Duty Applicability: 15 per cent (as applicable to CKD units) would be applicable for a period of 5 years.

Benefit of EV Policy

  • Attract manufacturers and investment: The E-Vehicle Policy is poised to attract global EV manufacturers, fostering high volume production within India.
  • Economies of Scale and Affordability: With increased production, economies of scale will drive down the cost of EVs, making them more affordable for Indian consumers.
  • Reduction of Air Pollution: The widespread adoption of EVs will lead to a significant decrease in air pollution levels within cities, positively impacting public health and the environment
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