India to expand EV manufacturing incentives after Tesla disappointment, source says

India plans to expand electric vehicle incentives to automakers building models at existing factories in the country, instead of limiting the benefits to automakers willing to build new plants, a person with direct knowledge of the matter said.

India's EV policy, which is still being finalised, was originally designed to encourage Tesla to enter the market and manufacture locally but the U.S. automaker backed off from those plans earlier this year.

Other foreign automakers have shown interest in making EVs in India at existing and new factories, according to minutes of a meeting with India's ministry of heavy industries that was seen by Reuters. It is hoped that changes to the policy will encourage EV investment from the likes of Toyota and Hyundai, the source said.

Under the policy announced in March, an automaker investing at least $500 million to manufacture EVs in India with 50% of components sourced locally is entitled to a huge cut on import taxes - a drop to 15% from as high as 100% for up to 8,000 electric cars per year. The government will now also consider EV investments at existing factories that currently build gasoline-engine and hybrid cars, said the source who was not authorised to speak to media and declined to be identified.

The electric models must, however, be built on a separate production line and meet the local sourcing criteria, the source said.

In the case of a new factory, investment in machinery and tools to build EVs will be counted in full towards the $500 million requirement even if the equipment is also used to manufacture other types of cars, he said.

To ensure automakers are treated fairly, the government will set a minimum EV revenue target for a plant or a production line which must be met to qualify for the scheme, he said. He added that the policy would be finalised by March.

According to the minutes of the meeting, Toyota officials asked if the EV policy would allow for investing in a separate assembly line within a plant that produces multiple powertrains. It also sought to understand if the manufacturing and installation of charging stations would be counted as part of the $500 million investment requirement.

Toyota and the heavy industries ministry did not respond to Reuters requests for comment.

Hyundai asked if money spent on research and development could be counted as part of the $500 million investment requirement, the minutes showed. The source said it would not be counted.

Hyundai Motor India is awaiting the rollout of the final policy and guidelines, a spokesperson said.

Volkswagen's India unit wanted more leeway with the investment timeframe. It asked if 75% of the $500 million could be invested in the first three years of the five-year scheme, instead of 100% as currently required. It also sought to understand if investments by suppliers would qualify, the minutes showed.

Volkswagen said it was studying the latest EV policy "in detail" and would evaluate a way forward accordingly.