Context :
Firmer push for
local EV production …. HT …….. 14 Nov 2023
Extract :
The Union Ministry of Heavy Industries ( MHI ) is considering introducing a 50 %
domestic value addition (
( Phased Manufacturing
Program ) as part of its proposed Faster
Adoption and
Manufacturing of ( Hybrid and ) Electric Vehicles in India ( FAME ) III
DVA is calculated based on the NET SELLING PRICE of a product and the LANDED
COST of imported inputs
Further , the Heavy Industries ministry plans to introduce an ANNUAL
REVIEW of compliance with INDEGENIZATION NORMS
“ One thing is , there would be an ANNUAL CHECK of the applicants. There
would be DVA. There was no DVA in FAME so far; there was PMP . In the next
phase of FAME , when it comes up, we would have DVA “
Under PMP, the government offers, a GRADED DUTY STRUCTURE and a TIMELINE
for the GRADED IMPLEMENTATION of the indigenization of COMPONENTS over time to
discourage imports and boost demand for local products
“ DVA is a more refined concept. It’s much more stringent. We will keep
it at 50 % “
My Take :
Govt claims that EV manufacturers ( mostly , 2 wheelers ) wrongly claimed PLI
amounting to Rs 469
crores, by submitting wrong claims
Some manufacturers have admitted their wrong-doings and returned subsidy
amounts claimed .
Discussions are going on with the rest
Is DVA a “ more
refined concept “ , as compared to PMP ?
Let us examine the
definition of DVA
DVA = Net Selling Price – landed cost of imported components
I am assuming that
PLI covers all models of EVs manufactured by a
company
Not only, each model will have a different “ Net Selling Price “ , but these prices (
mostly )
keep going up
So which “ price “ will Govt take for computing DVA ? Start of year ? End of year ?
Ave of the
year ?
Now :
Landed
Cost of a given
component / sub-assembly :
= FOB price + Freight + Insurance + Import Duty ( applicable to that component
/ sub-assembly )
Let us ( safely )
assume :
Import Duty and
Insurance, remains the same , over a long period
But :
( A ) Freight can change, since , a manufacturer may import the SAME
component from DIFFERENT
( B ) Even FOB price can
differ based on “ Country of Origin “
Hence “ Landed Cost “ is a VARIABLE , from time to time
That will change
the “ Domestic Value
Addition “
Can we discount the possibility that a local EV manufacturer may also find “ other
ways “ to “ deflate “ the landed costs ( of numerous components / sub assemblies
) , and show 50 % DAV ?
Can a local EV manufacturer , also find “ other ways “ to show a HIGHER ( than
actual ) “ net selling price “ , thereby reaching / exceeding 50 % DAV ?
60 years ago ( when I was a Production Manager in a large engineering /
machinery manufacturing company ), we had to declare a PMP , for
each product
This required , making an UPFRONT DECLARATION ( in writing ) to the
Government , what components would get indigenized each year and their import
would not be
required
Govt approved such PMP and granted Import License for ONLY those components
which appeared in PMP
Simple
Forced “ indigenization “ in order to continue with ( ever higher )
production !
This takes me back to my following E-mails to our
Cabinet Ministers :
Will
Tesla follow Apple ?.................................. 23 May 2017
Extract :
Dear Elon :
For immediate approval ( in 24 hours ) , pl submit your PMP as follows :
2017-18 :
Set up factory next to Mundra Port ( Gujarat ) to facilitate
world-wide exports
Source locally, Tyres / Chasis / Body
/ Electricals / Windows / Dashboards ..etc
2019-20 :
Manufacture in your own factory , Li-ion Battery / Wall-mounted Powerpack
Storages /
2020-21 :
Manufacture RFID Sensors - Cameras – GPS locators
Augmented Reality Devices / Autonomous Navigation Devices ( Radar – Lidar
)
Now , it
is very possible that neither Shri
Gadkariji , nor Shri Goyalji ,
would be satisfied with such a slow PMP , spread out over a period of 5 years
They may , well request Elon to cut it down to 3 years
And , if they do, I get a feeling that Elon would telescope the entire PMP , in 2
YEARS !
Hey
Elon , What is so difficult ?........................ 15 Aug 2021
Extract :
Tesla to commit to following PHASED MANUFACTURING PROGRAM for making
Model 3 in India
|
Year ( Ap-Mar) |
Items to be procured locally |
Value Addition % ( For the Year ) |
Value Addition % ( Cumulative ) |
|
|
|
|
|
|
22 - 23 |
NIL
( Import of fully assembled cars ) |
- |
- |
|
|
|
|
|
|
23 - 24 |
KDU
– Knocked Down Units ( Add Assy Hours ) |
5 |
5 |
|
|
|
|
|
|
24 - 25 |
Tyres / Chasis / Body / Electricals / Windows /
Dashboards ..etc |
10 |
15 |
|
|
|
|
|
|
25 - 26 |
Li-ion Battery |
40 |
55 |
|
|
|
|
|
|
26 - 27 |
Sensors -
Cameras – GPS locators |
15 |
70 |
|
|
|
|
|
|
27 - 28 |
Autonomous Navigation Devices ( Radar – Lidar ) |
20 |
90 |
NOTES :
Ø Above mentioned list of components / sub-assys / Assys etc., is only illustrative.
Tesla may expand
Ø For each component / sub-assy.,Tesla would need to provide CIF prices ( $ and Rs
),
if imported , and providing
wise )
Ø Value Addition must be shown as a percentage of the final Ex-Factory selling
price of Model 3
Ø In case of depreciation of Rupee vis-à -vis Dollar , local value addition must not
suffer ( get reduced )
Ø Tesla should file with GOI, a quarterly RETURN , showing current value addition
and cars sold
Dear
Elon ( press@tesla.com ),
Ø You claim that Tesla purchased
from India, parts worth $ 100 million,
SO FAR
Ø Assuming that these purchase covered past 2 years, that works out to $ 50 million
/ year
Ø I further assume that , during 2022 – 23, you will import / sell some 5,000 Model
3 in
India, for a total CIF value
Ø Dividing $ 50 million by $ 200
million = 25 %
Ø Goes to show that, if the same parts were used for “ locally assembled “ cars, it
would amount to a “ local value
very FIRST YEAR itself !
I urge your Business Development Team, to go through my following earlier e-
mails to help
formulate your ENTRY STRATEGY for India
With regards,
Hemen Parekh
www.hemenparekh.ai /
15 Nov 2023
------------------------------------------------------------------------------------
PS :
Import Duties : Time to get Rational .... 27 July 2021
Ø Elon Musk has repeatedly said :
“ Starting with import / sale of fully assembled Model 3 , we plan to ,
progressively set up a full-
Ø Let the Central Government tell Elon :
“ Good !
We will let you import and sell, fully assembled Model 3 in India for ONE
YEAR , at 40 % import duty, provided ,
# You will NOT be allowed to import fully assembled cars beyond FIRST
year
# From Second Year onwards, you will be allowed to import ONLY some
sub-assemblies /
manufactured by any Indian Company ), by paying import duties as
applicable to those sub-assembles / components
# You will undertake / commit to a Phased Manufacturing Program , as
envisaged below :
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