Government Of India Gives Auto Factory Subsidy To Promote Electric Vehicles

Tata Motors, one of the car manufacturers that get subsidies from the Indian government. (photo: doc. unsplash)

Jakarta - India will provide incentives of around USD 3.5 billion (IDR 49.988 trillion) to automotive companies over a five-year period under a revised scheme to increase manufacturing and exports of clean-tech vehicles. Two sources familiar with the latest proposal told Reuters.

The Indian government's original plan was to provide about $8 billion to automakers and parts manufacturers to promote primarily gasoline technology, with the added benefit of electric vehicles (EVs).

The scheme was redrawn to focus on companies building electric and hydrogen-fueled vehicles, Reuters reported on Friday, with the shift just as Tesla Inc prepares to enter India.

It was not immediately clear why the allocation was revised, but one source said that as the focus has shifted to clean and advanced technology, fewer companies are eligible for the incentives.

India sees clean car technology as central to its strategy to reduce dependence on oil and reduce debilitating pollution in its big cities. They also want to meet their emissions commitments under the Paris Climate Agreement.

Domestic automaker Tata Motors is India's biggest seller of electric cars, with rivals Mahindra & Mahindra and motorcycle companies TVS Motor and Hero MotoCorp bolstering their EV plans.

India's biggest automaker, Maruti Suzuki, has no short-term plans to launch an EV because it doesn't look at volume or consumer affordability, its chairman said last month.

A government official with direct knowledge of the matter said the initial allocation over the five-year period had been reduced but up to 8 billion could be made available if the scheme was successful, initial funds were spent and certain conditions were met.

The official did not elaborate on the conditions, and India's ministry of industry and finance did not immediately respond to an email seeking comment.

Details of the scheme, part of India's USD 27 billion program to attract global producers, could be announced as early as next week, the two sources said.

Under the revised scheme, eligible companies will get cashback payments equivalent to about 10%-20% of their turnover for EVs and hydrogen fuel cell cars, one of the sources said.

The automaker will need to invest a minimum of about USD 272 million over five years to qualify for the payments.

Auto parts makers will get incentives to produce components for clean cars and to invest in safety-related parts and other advanced technologies such as sensors and radar used in connected vehicles.