Import duty on EVs hiked by 5-15%

Published On : 02 March 2020
By Tarashekhar Padhy

In an attempt to incentivize Indian manufacturing of EVs, the Government of India on this week hiked custom duty on imports of battery-powered automobiles between 5% and 15%.

The move may cause a price 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, a politician on the brink of the corporate said that its pricing had already accounted for higher duty as per the phased electric vehicle manufacturing plan of the government. However, it's still studying the detailed impact of the budget and is yet to require a turn pricing.

Other imported electric vehicles include the MG Motor ZS EV also as a clique of electrical two- and three-wheelers also as buses.

The customs on completely built units of electrical commercial vehicles are increased from 25% to 40%, whereas the one with the interior 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 have been raised from 15% to 25%.

The duty on completely knocked down sorts of electric vehicles - all segments - passenger vehicles, buses, trucks, three-wheelers, and two-wheelers are raised from 10% to fifteen.

“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 localized content because the government had indicated as a part of the electrical and hybrid vehicles adoption scheme, he said.

For surety, vehicles falling in the category of Tata Nexon EV, Tigor EV, or Mahindra's KUV 100 EV may not see a hike as they follow the state's localization strategy and hence will avert the hike.

However, Goenka believes that the costs and, subsequently, demand for even the imported electric cars won't be significantly impacted. “My guess is that the asking price of multinational (branded) vehicles that are being sold today doesn't necessarily reflect the value. Prices are supported market expectations and don't 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 told the media that it is in coherence with the 'Make in India' policy and the stepwise manufacturing plan for EVs in India.