New Delhi: In a significant move to boost electric vehicle (EV) manufacturing India is set to introduce an “on-tap” facility under its upcoming EV incentive scheme. This innovative approach will allow global automakers including Tesla to test the Indian market before committing to large-scale investments. The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC) announced in March 2024 is expected to roll out detailed guidelines next month offering flexibility and incentives to attract foreign and domestic players.
What is the On-Tap Facility?
The on-tap facility is a unique provision that will enable EV manufacturers to apply for incentives over an extended period potentially up to 120 days or more. According to senior government officials the application window can also be reopened multiple times. This means companies like Tesla can first gauge market demand and consumer response before deciding to set up manufacturing units in India.
“The SMEC guidelines will be finalized soon, and the scheme will be operational next month. The on-tap facility ensures that companies don’t feel rushed into making investment decisions. They can test the waters and then apply for incentives when they’re ready,” a senior official told Economic Times.
A Win-Win for Tesla and Other Automakers
Tesla, led by Elon Musk has been eyeing the Indian market for years but has hesitated due to high import duties and uncertain demand. The on-tap facility could be the breakthrough Tesla needs. The company is already scouting for showroom spaces and hiring staff to sell its vehicles in India. However, it has yet to commit to local manufacturing.
Under SMEC, Tesla can import its electric cars at a reduced import duty of 15% (for vehicles priced at 35,000ormore)forfiveyears,provideditinvestsatleast35,000ormore)forfiveyears,provideditinvestsatleast500 million in local manufacturing. The on-tap facility allows Tesla to first assess the market potential and then decide on setting up a manufacturing unit.
Relief for Existing Automakers
The scheme also offers relief to global automakers with existing manufacturing facilities in India. Companies can set up EV assembly lines within their current factory premises and still qualify for incentives. This provision reduces the need for additional infrastructure investments, making it easier for automakers to transition to EV production.
SMEC: A Boost for India’s EV Ambitions
India announced the SMEC scheme on March 15, 2024, to encourage local manufacturing of electric cars and reduce dependency on imports. The scheme aims to position India as a global hub for EV production while addressing environmental concerns and reducing carbon emissions.
Automakers had previously expressed concerns about the high investment thresholds required for EV-only facilities. The on-tap facility and flexible guidelines are expected to address these concerns, making the scheme more attractive to both domestic and international players.
What’s Next?
The government is expected to finalize the SMEC guidelines within the next fortnight and open the application window soon after. With the on-tap facility, India is sending a clear message to global automakers: the country is ready to support their EV ambitions with flexible policies and attractive incentives.
For Tesla and other EV manufacturers, this could be the perfect opportunity to tap into one of the world’s fastest-growing automotive markets. As India accelerates its transition to electric mobility, the on-tap facility could be the catalyst that drives the next wave of investments in the EV sector.
