The government's new policy which slashes import duty on electric vehicles if a company invests $500 million to set up a new plant in India is a little bit unfair to existing manufacturers, says Vikram Pawah, president and chief executive officer, BMW Group India.
To promote manufacturing of EVs in India, the government introduced a new policy that slashed customs duty on electric cars with cost, insurance and freight value of $35,000 or more to 15% from the existing 100%. Under the scheme, automakers are required to invest at least ₹4,150 crore or $500 million to set up a new EV manufacturing facility in India within three years.
"If you look at the policy, they are talking about a huge investment that needs to be made. I don’t think it’s applicable to an existing manufacturer who already has plants with capacities," Pawah tells Fortune India, adding that brownfield investments should also be considered as BMW has been in India for the last 17 years.
"We have made our representations to the government. They have assured us they will look into this and make sure it’s a level playing field for everyone," he says.
While the new policy was tailor-made to woo Elon Musk’s Tesla, the U.S. carmaker has yet to commit any investment under the scheme.
Pawah says the policy requires huge investments and localisation for EVs and that market doesn’t exist today.
EVs accounted for 10% of BMW India’s total sales in 2023, much higher than its German rivals including Mercedes-Benz.
BMW, which has the widest portfolio of battery electric vehicles in India, currently imports all its EVs. But 90% of its sales come from nine internal combustion engine models that are assembled locally.
On localisation of EVs in the future, Pawah says, “Our volume seller models will be locally produced in India. EVs haven’t reached that stage yet. But when they do, we will certainly look at localising.”
India’s luxury car market is tiny when compared with other Asian countries. “The luxury car market in India is about 1% of the total passenger car market. Even if we look at Southeast Asian countries, they are all between 5% and 8%. In China, it is 16%. You go to Europe and Germany, it is 27%. In the U.S., it is 18%. We are nowhere near them,” says Pawah.
However, as the economy grows, Indian car buyers are expected to spend more on luxury cars. “But a lot of things need to happen right for that. Policies have to be right. Taxation needs to be rationalised. The infrastructure needs to develop at a pace at which it is developing today. The GST should remain stable for a longer time. It will happen. I am confident about India,” says Pawah.
The German automaker is hoping to hit 30% electric vehicle penetration in India before the government’s 2030 target.
EV adoption is faster in the luxury segment as premium car buyers don’t face similar challenges as mass market customers. “Most of our customers who buy luxury cars either have car parking space in the house or they live in condominiums where charging is available,” Pawah says.
Also, for luxury customers, an EV is not the only car in the household. “Our customers have at least one other car to do inter-city travel,” he says.
Charging time is also not a big issue for the majority of luxury car customers as most of these vehicles are chauffeur-driven. “Even if the car needs charging, it doesn’t hamper their time. The usage in the luxury market is different. 85% of our customers are chauffeur-driven,” Pawah explains.
Further driving EV sales for BMW in India are diesel car buyers who prefer better economics of EVs. “What’s happening is that some people who are concerned about buying diesel because of certain government policies, a lot of those diesel customers are looking at electrics as an option, especially those who do intra-city usage,” Pawah explains.
BMW has delivered 2,000 EVs in India so far. The German carmaker has sold 1,000 units of iX—its top-selling EV which costs almost ₹1.4 crore (ex-showroom)—over the past two and a half years.
To expand its product portfolio, BMW launched four new products on Wednesday including the electric Mini Countryman, Mini Cooper S, the BMW 5 Series long wheelbase and a premium electric scooter ‘BMW CE 04’.
