New E-Vehicle Policy Approved by The Indian Government: Stocks To Be Impacted

On March 15, 2024, the central government of India gave a green flag to the new Electric Vehicle (EV) policy, which promotes the country as a manufacturing destination so that e-vehicles (EVs) with the latest technology can be manufactured.

The objective of the policy is to welcome international EV manufacturers like Tesla to invest in the e-vehicle market. The new EV policy is likely to bolster the EV ecosystem, give Indian consumers access to the newest technology, support the Made in India initiative, and reduce air pollution, especially in urban areas. It will also result in high production volumes, economies of scale, lower production costs, and a reduction in crude oil imports.

The following are major pointers of the policy:-

• The manufacturer is required to make a minimum investment of ₹4,150 crore (∼USD 500 million).
• There is no limit prescribed by the government on the maximum Investment
• The manufacturing timeline is 3 years, starting with manufacturing facilities in India and starting commercial production of e-vehicles, and reaching 50% domestic value addition (DVA) within 5 years at the maximum.
• The manufacturer is required to achieve a localisation level of 25% by the 3rd year and 50% by the 5th year.
• The customs duty of 15% (as applicable to CKD units) would be applicable on vehicles of minimum CIF value of USD 35,000 and above for a total period of 5 years, subject to the manufacturer setting up manufacturing facilities in India within a 3-year period.
• The amount of duty waived on the entire amount of EVs that might be imported will be capped at the investment of ₹6,484 crore, which is the equivalent of the PLI scheme’s incentive, whichever is less. If the investment is USD 800 million or more, up to 40,000 EVs at a rate of no more than 8,000 per year would be allowed. It would be possible to carry over unused annual import limitations.
• In place of forgoing the custom charge, the company’s commitment to invest must be supported by a bank guarantee.
• In the event that the plan guidelines’ stipulated minimum investment conditions and DVA are not met, the Bank Guarantee will be triggered.

The government of India stated that the new EV policy is not likely to impact domestic players such as Tata Motors and Mahindra & Mahindra. However, Tata Motors and Mahindra & Mahindra advised the union govt in the past not to lower import duty on electric vehicles and to protect domestic firms and their foreign investors.

At present, cars imported as completely built units (CBUs) attract customs duty ranging from 70% to 100%, depending on engine size and cost, insurance and freight (CIF) value less or above USD 40,000.

“Our intention, therefore, is really not to cannibalise their (domestic players) market but to expand the EV market by bringing in new players, give the consumers the latest technology, kickstart the transition to EVs by bringing in, you know proven technology and while at the same time creating a competitive framework where the domestic manufacturers can also grow in that same space,” Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Rajesh Kumar Singh said.

Stocks Under Scanner

• Tata Motors: Tata Motors Group is one of the leading global automobile manufacturers. During CY23, the company sold 553k units in the PV (Passenger Vehicle) and EV (Electric Vehicle) segment, which proved to be the 3rd consecutive year of the highest-ever units in a CY.
• Mahindra & Mahindra:Mahindra & Mahindra Ltd is one of the most diversified automobile companies in India with a rich presence across 2-wheelers, 3-wheelers, PVs, CVs, tractors and earthmovers During Q3 FY24, the company witnessed a growth of 54% in electric 3 wheelers: sales volumes and market share stood at 54% in the electric 3 wheelers segment.

Other Auto Ancillary Stocks

• Exide Industries Ltd: Exide Industries Ltd is mainly involved in the manufacturing of storage batteries and allied products in India. The company’s lead-acid battery is required for lights, audio systems, and other equipment in an electric vehicle.
• Olectra Greentech Limited:Olectra Greentech Limited manufactures composite polymer insulators and electrical buses. The company’s electric bus products include E bus V2, iX, X2 & CX.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.