The Union Government on Friday approved a scheme to promote India as a manufacturing destination so that e-vehicles (EV) with the latest technology can be manufactured in the country.

The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers, Ministry of Commerce & Industry said.

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As per the Ministry, this will provide Indian consumers with access to latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude Oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment.

Fully assembled Completely Built-Up (CBU) vehicles priced at more than $40,000 will attract a 100% tax. Those below $40,000 are subject to 70% tax.

With the new scheme, companies like Tesla can import CBUs at the same rate as Completely Knocked Down (CKD) units that attract 15% import duty and have to be assembled.

Lower import duty will be allowed to original equipment manufacturers (OEMs) that commit to a minimum investment of Rs 4,150 crore in India.

Notably, to qualify for the scheme, companies will have to set up manufacturing facilities in India within three years and achieve a localization level of 50% by the fifth year.

An applicant company, or its affiliated enterprises, must have a minimum revenue threshold of Rs 10,000 crore from automotive manufacturing, along with a global investment commitment of Rs 3,000 crore in fixed assets.

Three years timeline has been assigned for manufacturing and to start commercial production of e- vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.

For the Domestic value addition (DVA) during manufacturing, the ministry said a localization level of 25% by the 3rd year and 50% by the 5th year will have to be achieved.

The duty foregone on the total number of EV allowed for import would be limited to the investment made or Rs 6484 Cr (equal to incentive under PLI scheme) whichever is lower.

A maximum of 40,000 EVs at the rate of not more than 8,000 per year would be permissible if the investment is of USD 800 MN or more. The carryover of unutilized annual import limits would be permitted.

The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone.

The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.