India unlikely to extend EV policy concessions to Chinese automakers

India's new electric vehicle (EV) policy is poised to attract a range of automakers to the market, including high-profile names, such as Tesla. However, Chinese automotive brands, namely BYD, are unlikely to benefit from the concessions offered under the new EV policy. A source from CNBC-TV18 revealed that India's FDI (foreign direct investment) law stipulates that a nation sharing a land border with India can invest only through the government. This aspect of the policy effectively discourages direct investments from neighbouring China.

Under India's new policy framework, there is a concessional rate of duty set at 15 per cent for the import of EVs, subject to specific conditions. One of the conditions is a minimum investment requirement of Rs 4,150 crore and a three-year timeline for building a manufacturing plant. These measures are created to encourage local production and strengthen the country's EV production ecosystem.

This reduced customs duty rate applies to EVs with a minimum Cost, Insurance, and Freight (CIF) value of USD 35,000 and above, aligned with the rate applicable to completely knocked down units. To safeguard against potential takeovers or acquisitions of Indian automakers, the Government of India amended the FDI policy, notably through Press Note 3 in April 2020.

Despite the open market opportunities, Chinese companies are expected to remain excluded from these benefits. The Centre continues to exercise caution regarding foreign direct investments (FDIs) linked to Beijing, citing national security concerns, according to a senior government official speaking to Moneycontrol.

According to an official who spoke to CNBC-TV18, "The concessional import duty policy is linked to actual investments in that sense. BYD does not come into the picture because it will not be able to provide FDI commitment that this EV policy needs. Because FDI will require clearances, BYD is, in the sense, out. Meaning, if it has to come, it will have to pay the existing duty of 70 and 100 percent."

Any investment proposal from Chinese or land-border nations will face a detailed scrutiny, and can come in only through the government route as per the rules laid down in Press Note 3, they added.

(with inputs from CNBC-TV18)

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