MEIL in talks to assemble BYD’s EVs in India as JV plan sputters

Hyderabad-based Megha is looking at contract-manufacturing the two models by assembling completely-knocked-down (CKD) kits, which attract a lower import duty than fully built cars. India levies 100% basic customs duty (BCD) on completely built-up units of EVs priced over $40,000 and 70% on those below $40,000. In comparison, semi-knocked-down and CKD kits attract a lower BCD of 35% and 15%, respectively. The plan is to start contract manufacturing around 25,000 units and scale it up to around 75,000 units for sale in India.

The new plans come as the duo’s $1 billion investment proposal submitted to the department for promotion of industry and internal trade (DPIIT) for an equal joint venture (JV) is yet to secure approval.

“Contract manufacturing will help Megha with the larger JV plan as it will help them with learning the technology and process. The investment proposal is alive and active," said one of the two people cited above, requesting anonymity.

In April 2020, DPIIT notified changes in India’s foreign direct investment (FDI) policy, mandating government clearance for all FDI inflows from countries with which India shares a land border.

“The $1 billion investment proposal was submitted to DPIIT for an equal joint venture between BYD and MEIL. The plan was to manufacture around 200,000 EV units and then scale up to 2 million units and co-brand and market the vehicles. The idea is to develop India as a hub for right-hand-drive EV manufacturing and cater to the markets such as those of Thailand, India and Japan," the person cited above added.

Queries emailed to the spokespersons of Megha, BYD India, DPIIT and the heavy industries ministry on 27 September remained unanswered.

While Megha manufactures electric buses through Olectra Greentech Ltd, a partnership with BYD, its subsidiary Evey Trans Pvt. Ltd operates electric buses. BYD set up BYD India in March 2007 and has invested $200 million in setting up two factories that assemble the Atto 3 and e6.

Megha, which is building the Zojila tunnel between the Union territories of Ladakh and Jammu and Kashmir, has also shown an interest in buying out the government’s 63.75% stake in Shipping Corp. of India Ltd and the 26% stake in state-run defence equipment maker BEML Ltd. It was also in the fray for buying Neelachal Ispat Nigam Ltd, which was acquired by a Tata Steel arm. Megha recently secured a $648 million work order from Mongol Refinery State Owned Llc.

As part of its energy transition efforts, India is focusing on the electrification of its economy by greening electricity, which involves a concerted push for green mobility, including EVs. However, limited charging points and the high cost of EVs have deterred buyers so far, limiting adoption.

The government has been pushing EV adoption through schemes such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India, a ₹25,938 crore production linked incentive (PLI) scheme for the auto sector, including EVs, and a ₹18,100 crore PLI scheme for advanced chemistry cell, as well as reducing the goods and services tax rate on EVs from 12% to 5% and on charging stations from 18% to 5%. Also, the ministry of road transport and highways has advised states to waive road tax on EVs.

India’s EV market is expected to expand at a compounded annual growth rate of 49% between 2021 and 2030, with the segment’s volumes set to cross annual sales of 17 million units by 2030, according to Invest India.

“Moreover, the gradual improvement in charging infrastructure and investments in developing a local vendor ecosystem has further contributed to the rapid adoption of EVs. Impressive investments of at least ₹70,000 crore for the OEM segment and ₹30,000 crore for the components segment have already been announced," Icra said in a 1 August note.