In a significant step to attract global automakers to make in India, the Centre has on June 2 notified new guidelines for a proposal to domestically manufacture electric cars.
The scheme will now allow companies to import a limited number of electric cars at a lower import duty of 15 percent versus the current duty that ranges between 70-110 percent. Approved companies will be able to import fully-built electric cars valued at $ 35,000 or more at a 15 percent duty rate.
However, the lower import tax can be availed by automakers only if they commit to investing Rs 4,150 crore ($486 million) to manufacture electric passenger cars in India within three years from getting the approval, the Ministry of Heavy Industries said in a statement. The unit should also commence manufacturing electric cars within this three year period, the guidelines stated.
Read More: Don't expect Tesla to manufacture in India anytime soon, says Union Minister HD Kumaraswamy
The maximum number of electric cars allowed to be imported at the reduced duty rate will be capped at 8,000 units per year. The ministry said the carryover of unutilised annual import limits would be permitted. Besides, the total duty savings has been capped at Rs 6,484 crore or the actual investment, whichever is lower.
Union minster for heavy industries minister HD Kumaraswamy said the scheme is strategically crafted to position India as a global hub for electric vehicle manufacturing. "With a minimum investment threshold of Rs 4,150 crore, it provides an enabling policy environment for leading global and domestic players to establish long-term manufacturing footprints in the country," he said while talking to reporters on June 2.
The scheme was first announced in March, 2024, but was later taken up by the Ministry of Heavy Industries for tweaks to make it more attractive to major automakers and tighten eligibility norms.
Eligibility and Applications
While the broad outline of the scheme is in line with what was announced in March last year, certain conditions have been tightened in the revised policy to weed out non-serious players.
To be eligible to apply, a group of companies will have to have a minimum annual revenue of Rs 10,000 crore from automotive manufacturing, while the annual revenue in fixed assets will have to be at least Rs 3,000 crore.
Applications for the scheme are likely to open as early as this month on the website of the Ministry of Heavy Industries, and the window for receiving applications will be for at least 120 days. Further, the ministry shall have the right to open the application window, as and when required till March 15, 2026. A non-refundable application fee Rs 5 lakh will be payable by the applicant while filing the application form.
Once approved, the automaker will be mandated to show a minimum revenue requirement of Rs 5,000 crore in the fourth year and Rs 7,500 crore a year later for any applicant approved under the policy. Those falling short will face a penalty of up to 3 percent on the revenue gap.
Domestic Value Addition (DVA)
The scheme mandates a minimum DVA of 25 percent to be achieved within three years. The DVA will have to be gradually increased by the automaker to 50 percent to within five years from the date of issuance of approval letter by the government.
Union minister Kumaraswamy said through calibrated customs duty concessions and clearly defined domestic value addition (DVA) milestones, the scheme strikes a balance between introducing cutting-edge EV technologies and nurturing indigenous capabilities.
"By mandating DVA targets, the scheme will further boost the ‘Make in India’ and ‘Aatmanirbhar Bharat’ initiatives, while empowering both global and domestic companies to become active partners in India’s green mobility revolution," he said.
Mercedes, Kia, Hyundai, Skoda, Volkswagen interested
Kumaraswamy said Tesla does not want to produce cars in India, while adding that auto majors such as Mercedes-Benz, Kia, Hyundai, Skoda and Volkswagen are among the foreign carmakers that have shown interest to manufacture in the country.
The third-largest Asian economy is seeking to lure EV makers like Elon Musk-led Tesla Inc., which is gearing up to start selling its cars to India after criticizing the country’s high duties regime for years. India is still a market hotspot for EVs while demand is mellowing in other parts of the world.
The new policy, if it draws industry giants, will also intensify competition for local automakers who currently dominate the EV segment. Domestic players like Tata Motors and Mahindra & Mahindra have invested millions of dollars in local EV manufacturing, with more to come, and lobbied against duty cuts.
India's EV sales, dominated by Tata Motors, accounted for just 2.5% of total car sales of 4.3 million in 2024, and the government wants to increase this to 30% by 2030.
The scheme aligns with India’s national goals of achieving Net Zero by 2070, fostering sustainable mobility, driving economic growth, and reducing environmental impact.
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