Mumbai/New Delhi: In a bid to incentivize local manufacturing of electric vehicles, the Government of India on Saturday increased custom duty on imports of battery-powered vehicles between 5% and 15%.
The move may lead to a cost increase for electric vehicle makers who import their vehicles as completely-built units or as knocked-down kits.
Hyundai Motor India imports its Kona EV, however, an official close to the company said that its pricing had already accounted for higher duty as per the phased electric vehicle manufacturing plan of the government. However, it is still studying detailed impact of the budget and is yet to take a call on pricing.
Other imported electric vehicles include the MG Motor ZS EV as well as a clique of electric two- and three-wheelers as well as buses.
The customs duty on completely built units of electric commercial vehicles have been increased from 25% to 40%, whereas the one with the internal combustion engine has been increased from 30% to 40%. The tax on semi-knocked down forms of an electric passenger vehicle, three-wheeler has been increased from 15% to 30%, whereas semi-knocked down electric, buses, trucks and two-wheelers has been raised from 15% to 25%.
The duty on completely knocked down forms of electric vehicles – all segments – passenger vehicles, buses, trucks, three wheelers and two-wheelers have been raised from 10% to 15%.
“The government is being consistent,” said Pawan Goenka, managing director of leading electric vehicles maker Mahindra and Mahindra. The government had relaxed duties on the import of EVs to spur value-addition in the local market and kickstart the industry, but the relaxations will now be slashed to increase localised content as the government had indicated as part of the electric and hybrid vehicles adoption scheme, he said.
To be sure, vehicles like Tata Nexon EV, Tigor EV, or Mahindra’s KUV 100 EV may not see a price increase as they follow the government’s localisation plan and hence avail lower duty.
However, Goenka believes that the prices and, subsequently, demand for even the imported electric cars will not be significantly impacted. “My guess is that the selling price of multinational (branded) vehicles that are being sold today do not necessarily reflect the cost. Prices are based on market expectations and do not necessarily reflect cost,” he said.
The move will likely affect electric rickshaws and buses imported from China the most, said Sugato Sen, deputy director-general at the Society of Indian Automobile Manufacturers (SIAM), an industry lobby body.
Shamsher Dewan, VP and sector head, corporate ratings, ICRA Ltd stated it is a step in the right direction, but the push towards local manufacturing will vary from segment to segment. The companies will be compelled to localize battery packs, motors and power control units which may call for local manufacturing.
“The move from imports to local manufacturing of parts may be high on lesser sophisticated three-wheelers versus buses as the volumes are large to justify the investment. The parts for commercial vehicles may be in thousands versus tens of thousands for other segments,” added Dewan
Kavan Mukhtyar, partner at PWC says it is in line with ‘Make in India’ policy and the phased manufacturing program for EVs in India. The measure augurs well for the component fraternity.