Investments made in creating plant and machinery to qualify for sops under new EV policy

Investment in creation of physical infrastructure such as plant and machinery, charging stations, and assets developed or acquired by companies will qualify for getting sops under the Scheme for Manufacturing of Electric Cars (SMEC). Royalty payments made to overseas parent companies will not be considered as an eligible investment needed under the scheme, senior officials told ET.

SMEC is aimed at incentivising investments in setting up electric vehicle (EV) manufacturing capacity by lowering import duties on a select number of cars. Under the new EV policy, announced in March 2024, beneficiaries need to invest USD 500 million for setting up electric car manufacturing facilities. They also need to comply with up to 50% minimum domestic value addition commitment.

As an incentive, the centre will levy concessional import duties on cars being imported by companies qualifying under the scheme.

“Players interested in availing benefits under the SMEC were seeking clarity on the definition of investment during the consultations held in April this year,” a senior official said while adding that another round of discussions with interested parties will be held in a month.

“Qualified investment will be considered as money spent in setting up plant and machinery, charging infrastructure, and assets owned by company but not its premises,” the official said. Besides these, up to 10% of the building cost can also be billed as investment made in setting up EV making capacity.

“The assets should be acquired and on the books of the company seeking incentives,” he added.

These consultations were attended by a host of global and local companies on India's newest electric cars manufacturing policy focused on high end vehicles. The deliberations are being held before guidelines are to be firmed up by the Ministry of Heavy Industries.

Elon Musk’s Tesla was represented by its advisor, The Asia Group (TAG) India in the earlier meeting. Representatives of Vietnam's VinFAST, which is setting up an EV plant in Tamil Nadu joined the meeting through video link.

Other participants included Indian car makers like Tata Motors, Maruti Suzuki, and Mahindra & Mahindra. Global automotive giants like Hyundai, BMW, Kia, Volkswagen, Mercedes, Toyota, and Renault-Nissan also took part.

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