Tesla: As the dust settles on the new, liberalized import policy for electric four-wheelers, two different scenarios could emerge in the near future. One, there is likely to be a churn in the local component industry, as the promise of rapid growth in volumes drives rapid localization of some key parts required in electric cars. Until now, two out of three parts needed to make electric cars had to be compulsorily imported due to China’s dominance in supply. Second, the electric car market may split along price lines – domestic OEMs like Tata and Mahindra may initially cater to the lower, price-sensitive end, while global giants like Tesla may target the lower end before targeting expensive models like the Model 3. Can bring cars. Of the market.
There have been some reports of Tesla launching a cheaper model this year as it prepares to enter India.
The e-vehicle policy was unveiled on Friday, just a day before the model code of conduct (which prohibits any policy announcement by the outgoing government). It allows a steep reduction (from 100% to 15%) in import duty on fully manufactured four-wheelers, as long as the importing entity also sets up a manufacturing base in India within three years. There are some other conditions as well, but the result of the policy is that the wish list of American giant Tesla has been completely approved by the outgoing government. Elon Musk had sought a steep cut in import duties to bring the Model 3 and other variants to India, as well as promised to invest up to US$2 billion in setting up a facility.
The new policy allows import of cars with a CIF value of up to US$35,000, which currently carries a 70% duty (100% for cars worth more than US$40,000, up from 15% duty) as long as they are within three years. Set up a manufacturing facility in India within. Another condition is that such companies must achieve a localization level of 50% by the fifth year. The statement said such a policy would “provide Indian consumers access to the latest technology, promote Make-in-India initiatives, strengthen the EV ecosystem by promoting healthy competition among EV players leading to higher volume production , economies of scale will increase.” Cost of production will reduce, crude oil imports will reduce and trade deficit will reduce.
Under the new policy, any foreign EV manufacturer will have to invest USD 500 million (Rs 4150 crore), show localization level of 25% within three years and 50% within five years. This will give the company the right to import e-vehicles with CIF value of US$ 35,000 (about Rs 29 lakh) and above at a concessional customs duty rate of 15% for five years. Under this policy, the annual import of e-vehicles has been limited to 8000 units.
Further, the total number of EVs that can be imported under the new policy will be determined by “the total duty foregone or investment made, whichever is lower, subject to a maximum of Rs 6484 crore”. And finally, the investment commitment made by each player agreeing to set up a manufacturing facility will have to be backed by a bank guarantee in return for the customs duty foregone.
Localization-,
Shamsher Dewan, senior VP and group head (corporate ratings), ICRA, pointed out that countries that have been leaders in EV adoption have also developed a local seller ecosystem. “This policy is a step in the right direction and will help increase localization of EV components in India, which currently stands at 30-40%. The chassis components that require minimal technology upgrades are manufactured locally. Over the years there has been substantial localization in traction motors, control units and battery management systems, while battery cells, which account for 35–40% of the vehicle cost, are still entirely imported. The scheme creates manufacturing opportunities for domestic auto component suppliers. For parts that are already used in ICEs, technological advances may in some cases result in higher content per vehicle. “In terms of revenue potential for subsidiaries, the e-PV component market is expected to be at least Rs 50,000 crore.”
Domestic manufacturing capacities for batteries – which account for up to 40% of the cost of an electric vehicle – are already ripe for major investment.
Maruti Suzuki India’s parent company Suzuki Motor Company has set up two separate facilities for batteries. TDSG, a three-way joint venture in 50:40:10 ratio between SMC, Toshiba and Dentsu, has an installed capacity of six million cells per annum in Gujarat. It is India’s first Li-ion cell and battery manufacturer and Maruti is purchasing battery packs from TDSG for its hybrid vehicles and is also exporting them to Europe and Indonesia. The plant manufactures lithium-titanium-oxide batteries for use in hybrids and after an initial investment of Rs 1200 crore, the joint venture has increased the total investment to Rs 3700 crore.
A second SMC facility is also coming up in Gujarat through Suzuki R&D India at an investment of Rs 7300 crore for cells and battery packs and this facility will exclusively make batteries for Maruti EVs to be launched in FY25. Hyundai Motor India has earmarked Rs 20,000 crore to “drive further penetration into EVs and modernize its vehicle platforms” in a phased manner over the next decade, Chief Manufacturing Officer Gopal Krishnan CS had earlier told ETAuto. .
The company plans to set up a state-of-the-art battery system assembly unit in Tamil Nadu with an annual capacity of 150000 units.
And Tata Autocomp had entered into a joint venture with Chinese company Goshan about four years ago to “design, manufacture, supply and service Li-ion battery packs for electric vehicles in India”. According to industry sources, this joint venture sources battery cells for Tata EVs from China and the battery packs are then assembled at its Pune facility.
Mahindra & Mahindra has already tied up with South Korean company LG Chem, where LG “develops a unique cell specifically for India and based on NMC (Nickel-Manganese-Cobalt) chemistry with high energy density.” Will also supply based Li-ion cells. , These cells will be deployed in Mahindra and SsangYong range of electric vehicles. LG Chem will also design Li-ion battery modules for Mahindra Electric, which will in turn make battery packs for Mahindra Group and other customers,” according to a statement issued at the time of announcing the agreement.
Sanjay Kapoor, president of Sona Comstar (which is one of Tesla’s Indian suppliers), said the new policy “ushers in a new era of innovation and access to cutting-edge technology and enhances the ‘Make in India’ initiative. By encouraging local manufacturing and promoting healthy competition, this policy will not only accelerate EV adoption but also boost economic growth.
Indian vs Foreign OEM
Overall, the current volume of electric cars sold in India is modest. The market, like ICE vehicles, can be divided into a mass market segment of Rs 15 lakh-18 lakh and a high-end segment of Rs 25 lakh-40 lakh. The volumes in the mass market segment are mainly driven by Tata Motors, MG Motors and M&M while foreign players like BYD India and Volvo etc. operate in the premium end of the market.
Crisil senior practice leader and director Hemal Thakkar had earlier said that the new policy will boost investment in the auto component industry. “And the government has maintained that it will limit the import of electric four-wheelers to 8000 units per year, which will not have any significant impact on the domestic industry. In fact, it will also provide customers with the option to look at a variety of models at attractive prices beyond what is currently available in India.
Maruti Suzuki India had also earlier welcomed the government’s decision to allow foreign OEMs to set up shop in India, saying it would promote best practices and latest technology in India. The company had also said that the new policy is catering to the upper end of the car market, so it is unlikely to impact local OEMs.
Vietnam’s Vinfast, which has signed an MoU with the Tamil Nadu government to set up a manufacturing facility with an initial commitment of US$500 million, has said the Indian initiative will help in establishing and strengthening a strong presence in key markets. An important part of the strategy. Its supply chain for global expansion. But analysts at brokerage Emkay cautioned that sales of some luxury EVs from German OEMs could be hit by the new policy.
“We believe that the EV policy is aimed at promoting the growth of the EV ecosystem/local manufacturing in India, while largely protecting Indian OEMs operating below the USD35,000 price point. Still, there could be some risk for M&M and some of Tata Motors’ upcoming models at the upper end of the SUV market. With the increasing entry of mid to premium EVs at competitive pricing this could potentially impact the sales of luxury vehicles (German brands) as well.