Govt mulls subsidising carmakers investing in local EV production

The government plans to extend incentives to carmakers based on the investments they make to manufacture cars locally, an official aware of the development said

The government is working on a policy to support local manufacturing of electric cars, a decision likely to provide a level playing field for the industry, The Economic Times (ET) has reported. The push for local manufacturing is likely to help generate more jobs and bring down the car's overall prices.

To this end, the Department for Promotion of Industry and Internal Trade (DPIIT) has started discussions to introduce a scheme for subsidising electric four-wheeler makers. The subsidy will be based on the investments made by these companies for producing vehicles in the country, senior officials familiar with the development were cited as saying in the ET report.

One of the government officials was quoted in the ET report, "Unlike FAME II (Faster Adoption & Manufacturing of Electric Vehicle), which is an upfront subsidy paid to consumers, this will be a manufacturing incentive." The government plans to extend incentives to carmakers based on the investments they make to manufacture cars locally, the officer added.

The government is contemplating determining the quantum of investment required by the car manufacturers to be eligible to get benefits under the scheme. The plan is still in the making as the Centre thinks about the outlay for the scheme.

The development has come to the fore at a time when the car industry is going through a major shift and is working towards developing vehicles that can run on alternate fuels. The news is significant since global carmakers like Tesla and VinFast, along with local manufacturers like Maruti Suzuki, Hyundai Motor India, Kia, Tata Motors and Mahindra & Mahindra (M&M) are looking to introduce new electric cars in the country, the ET report stated. VinFast is a Vietnamese car company, Tesla, on the other hand, is American.