India has revised its proposed $8 billion (approximately Rs. 58,400 crores) auto sector scheme, which will now focus on encouraging companies to build electric and hydrogen-powered vehicles, two sources familiar with the plan told Reuters .
This is a major shift from the government’s original plan to incentivize auto and auto parts manufacturers to build primarily gasoline vehicles and their components for domestic sale and export, with some added benefit to electric vehicles (EVs).
The move to clean technologies comes as Tesla gears up to enter India and is lobbying for lower tariffs on electric cars. As the government considers the request, it wants an economic benefit in return, including a commitment from Tesla to manufacture cars locally.
Under the new proposal, India will incentivize automakers to build only electric and hydrogen-powered cars, the sources said.
“The government doesn’t want to spend money on promoting old technologies,” said one of the sources.
However, auto parts manufacturers will have incentives to produce components for clean cars and to invest in safety-related parts and other advanced technologies such as sensors and radars used in connected cars, automatic transmissions, cruise control and other electronics, the sources said. .
“The idea is to promote the development of technology that is not currently produced in India, but is imported because regulations require it or because customers want those features in their cars,” the second source said.
The sources said the original stimulus spending of about $8 billion could also be cut and the production-related arrangement, which would apply to domestic sales and exports, could be completed as soon as possible by the end of September.
The Indian Ministries of Industry and Finance did not immediately respond to a request for comment.
India’s efforts to promote electric vehicles, which account for a fraction of total car sales, have so far been thwarted by a lack of investment and weak demand, as well as the patchwork of existing incentives that vary from state to state.
But the government is focused on adopting clean mobility so it can reduce its oil dependency and reduce pollution, while also meeting its commitments under the Paris climate accord.
Domestic automaker Tata Motors is currently the largest seller of electric cars in India, with rival Mahindra & Mahindra and motorcycle companies TVS Motor and Hero MotoCorp bolstering their EV plans.
However, India’s largest automaker Maruti Suzuki has no near-term plans to launch electric vehicles as it sees no volumes or affordability for consumers, the chairman said last month.
The incentive scheme is part of India’s broader program of $27 billion (approximately Rs. 1,97,100 crores) to attract global manufacturers so that it can boost domestic production and exports.
© Thomson Reuters 2021