Earlier in January this year, VinFast and the government of Tamil Nadu signed an MoU with the two sides agreeing to a $2 billion investment. VinFast has committed to investing $500 million in the first phase within five years. Building its integrated EV manufacturing plant in Tamil Nadu, it is expected to create 3,000-3,500 local jobs.
Early last month, India approved an EV policy that allows companies investing a minimum of Rs 4,150 crore (around $533 million) in the country and meeting certain localization requirements to import a limited number of vehicles at a reduced customs duty.
The policy aims to attract global majors like Elon Musk’s Tesla and VinFast in a bid to make India an EV manufacturing hub. According to it, investors get three years to set up a manufacturing base in India, begin commercial production, and achieve 50% domestic value addition (DVA) within a maximum period of five years (25% by the end of the third year).
According to sources quoted by The Hindu BusinessLine, VinFast India CEO Pham Sanh Chau met with the Indian Ministry of Heavy Industries (MHI).
“India appeared to have been taken by surprise when the Heavy Industries Secretary reportedly conveyed to them that any incentives/concessions a company seeks will apply only from the date the policy is notified and not from the date of commencement of investments by the manufacturer,” the source said.
An Indian official said: “I think there has been some miscommunication… VinFast thought it could invest the $500 million by the end of the fifth year. But the policy clearly states that a company must invest the amount by the end of the third year. By the end of the third year, VinFast will have to complete its $500 million investment and start producing vehicles with 25% domestic value addition (DVA).”
VinFast has broken ground on its electric vehicle plant in India.
The support policy clearly states that firstly, if the company fails to invest $500 million in the first three years, the bank guarantee will not be considered.
Secondly, it adds that the investment will be counted only after 240 days. The first 120 days (four months) are known as application period, after which there are another 120 days for MHI to assess and approve the proposal.
The official further explained: “The investment period will start only after they get the letter of confirmation from the ministry, which means their investment period will start only after eight months.”
The Indian administration fears that VinFast may delay its India operations and put its plant construction on hold for now after understanding the contours of the incentives policy.
