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VinFast's $2B Tamil Nadu Investment Hangs Over Confusion On EV Policy Incentives

Updated: Apr 22, 2024 04:45:59pm

VinFast's $2B Tamil Nadu Investment Hangs Over Confusion On EV Policy Incentives

New Delhi, Apr 22 (KNN) VinFast, the Vietnamese electric vehicle maker, has found itself in a confusing situation regarding the applicability of incentives and subsidies under India's newly approved EV policy.

The company's USD 2 billion investment to establish an integrated EV facility in Thoothukudi, Tamil Nadu, has been cast into doubt, reported BL.

During a meeting at the Ministry of Heavy Industries (MHI) on Thursday, attended by Pham Sanh Chau, VinFast India CEO, and stakeholders from major automakers, the CEO expressed confusion about when the benefits would start accruing.

VinFast's leadership had the impression that the incentives would be applicable from the day the company commenced its investment in India, based on their earlier meeting with Commerce Minister Piyush Goyal in January.

However, MHI officials clarified that the subsidies would only apply after the policy's implementation, not from the investment's start date. Additionally, VinFast had misunderstood the requirement of investing USD 500 million by the third year, with vehicles rolling out with 25 per cent domestic value addition (DVA).

The policy states that if the USD 500 million investment is not made within the first three years, the bank guarantee will not be considered. Furthermore, VinFast's investment in Thoothukudi from January will only be counted after 240 days, as the policy mandates an application window of 120 days followed by a 120-day evaluation period by MHI.

With these granular details clarified, there is uncertainty surrounding VinFast's plans, as the government apprehends that the company might delay or halt the construction of its plant for the time being.

VinFast and the Tamil Nadu government had signed an MoU in January, agreeing to invest USD 2 billion, with an initial commitment of USD 500 million for the first phase spanning five years. The project is expected to create 3,000-3,500 local employment opportunities.

The new EV policy aims to attract major multinational companies like Tesla and VinFast, promoting India as a manufacturing destination. It offers reduced customs duties for companies investing a minimum of Rs 4,150 crore and meeting domestic value-added conditions, while giving them three years to set up facilities, start commercial production, and reach 50 per cent DVA within five years (25 per cent by the third year).

(KNN Bureau)


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