After US Tariff Clarity, the Centre May Modify EV Manufacturing Policy

According to reports, the Centre is willing to change its Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC) in light of the results of previous free trade agreements and the Bilateral Trade Agreement (BTA) with the United States. The March 2024 announcement of SMEC has not yet been implemented.

 The plan allows authorised EV manufacturers to establish production plants in India for EV four-wheelers with a $500 million minimum expenditure. The programme also imposes a 15% tariff charge on imported EVs.

The government may change the policy to draw in international manufacturing companies if the BTA talks result in 15% import auto tariffs and targeted investment amounts, according to a media report.

India and US in Discussion Regarding Proposed BTA

The planned BTA, which will cover tariffs, non-tariff barriers, and customs facilitation, is presently being discussed between the US and India. In order to facilitate trade, both nations will be expected to reduce or do away with customs tariffs if the agreement is implemented.

In addition, India is negotiating free trade agreements with a number of nations, including Belgium, Norway, and the United Kingdom.

Main Goals of the SMEC

The SMEC programme seeks to entice international EV producers to put money into India's expanding EV sector."

The initiative would also help place India on the world map for manufacturing EVs, generate employment, and meet the goal of "Make in India", the government had stated when the scheme was announced last year.

In addition to minimum investment amounts and import tariff rates, the programme mandates that manufacturing facilities achieve a minimum domestic value addition (DVA) of 25% and be operational within three years of the Ministry of Heavy Industries' (MHI) approval date. After the facility is set up, the corporation should reach 50% DVA in 5 years.

Even though the programme is gaining popularity worldwide, industry titans like VinFast and Tesla continue to struggle with India's high EV import tariffs.

Tesla’s CEO Taneja India’s Current Tariff a Major Roadblock

The current tariff structure in India, according to Tesla's CFO Vaibhav Taneja, is a barrier to the company's entry into the Indian market.

It is important to remember that imported cars valued at more than $40,000 (more than INR 34 lakh) CIF (cost, insurance, and goods) are subject to a 100% tariff in India. Additionally, by the end of June this year, Vietnamese EV giant VinFast plans to build its India unit in Tamil Nadu.

 With an initial commitment of $500 million over the first five years, this plant is a component of VinFast's $2 billion investment in the nation.