Chinese BYD company may not receive India’s EV policy concession: Reports

Chinese businesses might not be able to take advantage of the policy's benefits, even though it is generally anticipated that India's electric vehicle (EV) policy would draw international players into this market, including Elon Musk's Tesla Inc, Moneycontrol reported on Monday. 

Under certain conditions, such as a minimum investment of Rs 4,150 crore, India's policy allows a concessional rate of tax of 15 per cent.

However, Chinese and China-related businesses are probably out of the picture because, citing senior government source Moneycontrol reported, New Delhi is still cautious of FDIs connected to Beijing because of national security concerns.

“In that respect, the policy of concessional import duties is tied to real investments. Since BYD cannot commit the FDI that this EV strategy requires, it is excluded from consideration. In a sense, BYD is out as FDI will need permissions. This means that if it must arrive, it will be required to pay the current 70–100% duty,” the official stated.

To qualify for the reduced import tariff rate of 15 per cent, the EV policy stipulates a minimum investment and a three-year deadline for the establishment of manufacturing facilities in India to begin commercial production of e-vehicles.

Aiming to prevent opportunistic purchases or takeovers of Indian enterprises, the Centre modified the Foreign Direct Investment (FDI) policy, notably Press Note 3, in April 2020.

According to the new regulation, an entity of a nation that borders India on land, or a person of any such nation, may only make investments through the government route if the beneficial owner of the investment is located there. 

Press Note 3's revised guidelines become effective on April 22, 2020.

According to the guidelines outlined in Press Note 3, any investment proposal from China or land-border countries will be subject to a thorough review and may only be submitted through the appropriate channels.

Considering Beijing is one of the biggest competitors in the EV market, India's unwillingness to provide advantages to Chinese EV manufacturers through its recently announced policy is noteworthy.

In terms of EV production, sales, and exports, China is a major worldwide leader. According to the International Energy Agency (IEA), Beijing will account for more than 35 per cent of outbound exports of electric cars in 2022 and is both the world's top manufacturer and exporter of these vehicles.

China accounted for around 60% of worldwide sales of electric automobiles in 2022, making it the world leader in this regard. China now has more than half of all-electric vehicles on the road worldwide. According to an IEA assessment, the nation has already surpassed its 2025 goal for the sale of new energy vehicles.

According to a Reuters article on April 12 that cited research company Rho Motion, global EV sales increased to 1.23 million units in March 2024, with purchases in China climbing by 27% and the US by 15%.

The official responded to a question about whether India would lose out by not giving its EV policy benefits to such a significant participant in the industry by saying that the nation made a decision.

Although China BYD car imports are permitted, India does not want Chinese investment. Through the EV policy approach, this now eliminates any Chinese EV manufacturers from consideration," the official stated.