India's new flagship EV policy to be a ‘non-starter' for global biggies
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India is rolling out a new flagship electric vehicle policy that aims to lure global automakers into making cars locally. It knows Tesla Inc. may still not bite.The Narendra Modi-led government will soon start accepting applications under the EV incentive program that was unveiled in March last year, HD Kumaraswamy, India's heavy industries and steel minister told reporters in New Delhi on Monday. Bloomberg News reported on this earlier in the day.The policy offers to slash duty to 15% on any imported electric car priced from $35,000 if the maker invests at least 41.5 billion rupees, or about $500 million, to set up a local plant within three years. Up to 8,000 cars yearly can be imported at this reduced rate.But Tesla is unlikely to participate as it isn't keen on manufacturing locally and instead wants dealerships and showrooms to sell imported cars, Kumaraswamy said, without elaborating. Tesla has long wanted to enter India, but disagreements over import duties and local manufacturing commitments have stalled progress.BYD Co. is a no-go for the South Asian nation, showing New Delhi's lingering angst with China. India's commerce minister said in an April interview that the country needs to be 'cautious' about who it allows to invest. VinFast Auto Ltd. is already building a factory in India, even before the new policy kicked in.'The EV policy could be a non starter,' said Jay Kale, sector analyst at local brokerage Elara Securities India Pvt., explaining that there was little benefit in terms of 'pure-play' EV makers without Tesla, BYD and VinFast in the fray.Some global legacy automakers could benefit by setting up EV-only plants in India and importing electric cars initially under this policy, according to Kale. 'However, how these models pan out in India have to be seen as most of these carmakers haven't been successful in their home markets in EVs,' he said.While the government is keen to boost manufacturing in the world's third-largest car market where demand for EVs is still rising, it faces stiff resistance from domestic heavyweights including Tata Motors Ltd. and Mahindra & Mahindra Ltd., which have long been protected by a wall of high tariffs.The appeal of the new policy is further dulled by stringent conditions like revenue targets and penalties for failing to fulfill them, besides the investment commitment.It mandates a minimum revenue of Rs 5,000 crore ($586 million) in the fourth year and Rs 7,500 crore a year later for any applicant approved under this policy. Those falling short will face a penalty of up to 3% on the revenue gap.Applications may open as early as this month and extend till March 15 next year, according to people familiar with the discussions who did not want to be named.
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