Guidelines for scheme to boost electric passenger car manufacturing likely by February-end

Scheme to Promote Manufacturing of Electric Passenger Cars (SMEC) in India was announced on March 15, 2024.

The government is likely to release detailed guidelines for the Centre’s "Scheme to Promote Manufacturing of Electric Passenger Cars in India" (SPMEPCI)"  by February-end, paving the way for global automakers to invest and manufacture electric vehicles (EVs) in the country. The scheme, which includes provisions for reduced import duties on EVs for manufacturers committing to local investments, will officially open for applications once the guidelines are issued, a senior government official told Moneycontrol.

“The scheme is there. We have to issue a notification and guidelines. By February-end, the government should be able to come out with the detailed procedures and clarifications,” the official said on the condition of anonymity.

The Ministry of Heavy Industries has already reached out to global original equipment manufacturers (OEMs) through the Society of Indian Automobile Manufacturers (SIAM) to gauge investor interest. Stakeholder consultations were also held in 2024 to refine the guidelines. "Once the guidelines are published, OEMs can start applying under the scheme. Even Tesla can apply," the official added.

Tesla had been eyeing the Indian market for its electric vehicles, with CEO Elon Musk expressing interest multiple times on social media. The company had even planned a high-level visit to India in 2022 to explore entry prospects but cancelled it at the last minute. Tesla was seeking significant cuts in India’s import duties for fully built units (CBUs) before committing to local manufacturing.

With the upcoming guidelines, the government aims to create an enabling environment for foreign and domestic players to invest in India’s EV industry, laying the foundation for the country to become a leading destination for electric vehicle production and innovation.

Investment Requirements

The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) was announced on March 15, 2024. It aims to attract global automakers and strengthen India’s domestic EV manufacturing ecosystem. Under the scheme, applicants are required to invest a minimum of Rs 4,150 crore and achieve a domestic value addition (DVA) of at least 25 percent by the end of the third year and 50 percent by the end of the fifth year.

The proposed guidelines, aligned with the production-linked incentive (PLI) scheme for automobiles and auto components, will assess domestic value addition based on various parameters. Expenditures on research and development (R&D) and building EV charging infrastructure will be considered eligible investments under the scheme.

To incentivise manufacturers further, the policy plans to slash import duties on EVs priced above $35,000 (cost, insurance, and freight) to 15 percent from the current rates of 70 percent or 100 percent, provided manufacturers meet the minimum investment and DVA requirements. The reduced import duties will give a significant boost to automakers keen on entering the Indian market.

The policy’s focus on local manufacturing and the development of robust supply chains is expected to reduce dependence on imports and enhance the country’s technological capabilities in the EV sector.