Opinion: What the new E4W policy offers to OEMs, Consumers

by Saurabh Agarwal & Bhavesh Ahuja

In a bold endeavour to position itself as a global manufacturing powerhouse for electric vehicles (EVs), India has launched a policy to foster domestic production by harnessing its manufacturing prowess to drive innovation, economic growth, and sustainable mobility solutions.

Bolstered by recent initiatives like the Auto PLI scheme EVs, FAME and PLI for Advanced Chemistry Cell (ACC), the nation is poised to carve out a significant presence in the burgeoning EV market.

Amidst a global push towards sustainable transportation, India has set its sights on becoming a premier destination for EV manufacturing. Recognizing the transformative potential of electric mobility, the government has unveiled a comprehensive EV policy framework aimed at attracting investments, promoting domestic manufacturing, and fostering innovation in the sector.

The transition to e-mobility

The new EV policy outlines several key tenets aimed at accelerating the transition to electric mobility in India. These include:

·Incentives to be provided to companies looking to invest in EV manufacturing with a minimum investment threshold of INR 4150 crore (approximately USD 500 million) and no capping on maximum investment.

·The policy also sets a timeline of 3 years for companies to establish manufacturing facilities and commence commercial production of EVs, with a target of achieving 50% domestic value addition within 5 years; including achieving localization level of 25% by the 3^rd year of manufacturing.

·Further, such companies within the stipulated 3-year period will benefit from a reduced customs duty rate of 15% on Completely Built Up units (at present the customs duty rate on such units is 70%) . The said duty foregone on imports will be limited to investment made or INR 6,484 crore whichever is lower.

Cost cut to catalyse consumer adoption

Central to India's ambition of becoming an EV manufacturing hub is the imperative to drive down the costs of electric vehicles, making them more affordable and accessible to consumers. The new policy offers a range of incentives, including reduced customs duties and import limits tied to investment commitments, to entice global manufacturers to establish production facilities within the country.

Empowering commercial and private users: For commercial entities, the affordability of EVs translates into tangible cost savings and enhanced operational efficiency. With lower operating costs and reduced dependence on fossil fuels, electric fleets offer a compelling value proposition for businesses seeking to optimize their transportation operations while minimizing environmental impact. Similarly, for private consumers, the prospect of owning an EV becomes increasingly feasible with the anticipated reduction in purchase prices. As India strengthens its position as an EV manufacturing hub, the broader availability and affordability of electric vehicles are poised to accelerate the transition towards sustainable mobility solutions.

What should consumers do?

For consumers contemplating the purchase of an EV in near future, it's crucial to acknowledge that the effects of the new policy won't manifest overnight. If one is to buy a high-end EV in near future, it's unlikely to notice a significant difference in price. However, if one is flexible in the purchase timeline, waiting for a few additional months could prove beneficial.

By delaying purchase, one may benefit from potential price drops, which depending on market dynamics and competitive pressures, could also be substantial in high-end EVs. Thus, while immediate savings may not be substantial, consumers can maximize their value proposition by strategically timing their EV purchase.

Conclusion

India's endeavour to become an EV manufacturing hub heralds a new chapter in the nation's industrial evolution, characterized by innovation, sustainability, and economic resilience. By incentivizing domestic production, reducing import barriers, and prioritizing affordability, the government's EV policy empowers consumers and businesses alike to embrace electric mobility with confidence. As India cements its position as a manufacturing powerhouse for EVs, the benefits of this strategic initiative are poised to extend beyond its borders, shaping the future of mobility on a global scale.

(Disclaimer: Saurabh Agarwal is Partner, EY and Bhavesh Ahuja is Director, EY. Views are personal.)