New EV Policy Offers Incentives For Plant And Machinery Investments

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Investments in creating physical infrastructure such as plants, machinery, charging stations, and other assets developed or acquired by companies will qualify for incentives under the Scheme for Manufacturing of Electric Cars (SMEC).

Investments in physical infrastructure, including plants, machinery, and charging stations, are eligible for incentives under the Scheme for Manufacturing of Electric Cars (SMEC). This initiative seeks to enhance electric vehicle production by reducing import duties on certain vehicles. To qualify, companies must invest at least USD 500 million and ensure that 50% of the value addition is domestic. Ongoing discussions aim to specify qualifying investments. Key stakeholders, such as Tesla, VinFAST, Tata Motors, and Hyundai, are actively participating in the development of this policy. However, royalty payments to overseas parent companies will not count as eligible investments, according to senior officials.

SMEC aims to boost investments in electric vehicle (EV) manufacturing capacity by reducing import duties on a selected number of vehicles. Under the new EV policy, announced in March 2024, beneficiaries must invest USD 500 million in setting up electric car manufacturing facilities and ensure at least 50% domestic value addition. As a benefit, the centre will apply concessional import duties on cars imported by qualifying companies.

During consultations held in April, participants sought clarification on what constitutes an investment. Further discussions are scheduled in a month to refine these details. Qualifying investments include expenses on plant and machinery, charging infrastructure, and company-owned assets, excluding company premises. Additionally, up to 10% of building costs can also be considered as an investment towards EV manufacturing capacity.

The consultations, focusing on high-end vehicles, have involved numerous global and local companies. These discussions, attended by companies like Tesla, VinFAST, Tata Motors, Maruti Suzuki, and international automotive leaders such as Hyundai and BMW, aim to finalize guidelines with the Ministry of Heavy Industries.

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