MC EXCLUSIVE Foreign automakers prefer state-level EV schemes over central policy

State governments are also helping foreign players with cheaper land and are connecting them with local part makers to ease the process of investment in the country, whereas the central government has provided no such benefits

Foreign automakers are choosing to partner with state governments offering more flexible incentives and faster clearances for setting up manufacturing facilities for electric vehicles (EVs), rather than the central scheme.

Nearly a month after the launch of the portal for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), the government informed the Lok Sabha on July 22 that it had not so far not received  any application, raising fresh questions about the scheme’s design and appeal.

Multiple senior executives from global automobile firms told Moneycontrol that the central scheme’s design favours companies willing to set up entirely new EV manufacturing plants. In contrast, several Indian states—such as Tamil Nadu, Andhra Pradesh, Karnataka and Telangana—are already offering robust policy support for manufacturing, sourcing, and ecosystem development, without the restrictive terms of the central policy.

"The parameters under SPMEPCI benefit greenfield entrants with deep capital. Existing players already operating in India find the scheme less relevant," said a senior executive from a German carmaker, who spoke on condition of anonymity. "States are giving us faster approvals, land at competitive rates, and even helping connect with local part makers. That makes a difference."

Another executive from a European original equipment manufacturer (OEM) said the scheme’s core incentive—a concessional import duty of 15 percent on up to 8,000 electric vehicles per year—is not significant enough when weighed against high localisation targets and a minimum investment requirement of Rs 4,150 crore. The official added that most state schemes provide a more comprehensive stack: direct tax waivers, power tariff reimbursements, capital subsidies, and labour incentives.

While the central scheme allows companies to import parts for EVs at reduced duties for five years—compared to standard rates between 70 to 100 percent—it comes with the condition of achieving 25 percent domestic value addition (DVA) within three years and 50 percent within five. Several executives pointed out that these thresholds are steep, especially for companies that have already invested in India and want to scale up using existing infrastructure.

A third executive, representing a global brand with manufacturing operations in India, said the SPMEPCI framework does not take into account legacy investments. "We’re already in the middle of a capex cycle. If we plan to invest Rs 4,000 crore more, we’d rather do it through local sourcing and partnerships—not through imported units. The current scheme doesn’t reward that approach," he said.

According to a senior government official familiar with the industry discussions, foreign OEMs have expressed reservations about the DVA mandate and have asked whether the government is open to relaxing the investment threshold or recognising past investments. The official said the Centre is evaluating potential modifications but no formal revisions have been announced yet.

States, meanwhile, have been far more aggressive in courting EV investments. Tamil Nadu’s 2023 EV policy includes special packages for manufacturers investing more than Rs 50 crore, subsidies for charging infrastructure, and state GST reimbursements. It also offers low-interest loans, electricity tax exemptions, and up to Rs 48,000 per employee per year in EPF support for local hiring.

Since launching the policy, Tamil Nadu has signed MoUs worth Rs 35,000 crore, with companies such as Ola Electric, TVS Motor, BYD, and Ather Energy expanding operations in the state.

Andhra Pradesh, under its Sustainable Electric Mobility Policy (2024–29), is offering investment subsidies up to 35 percent capped at Rs 7 crore for investments upto Rs 20 crore and up to 15 percent for investments above Rs 20 crore.

The state is also offering reimbursements on turnover and electricity duty, and capital subsidies for charging infrastructure. Land-related incentives include full stamp duty waivers and reimbursement of conversion charges. Battery makers supplying the EV ecosystem receive an additional layer of support.

Several auto executives said that while the Centre’s scheme may be designed with long-term strategic goals in mind, the state policies are proving more effective at unlocking near-term investment and production. "What companies need is ease of doing business—access to land, local vendor bases, fast approvals. That’s where the state policies are scoring," one of the executives said.

The SPMEPCI portal remains open until October 21. While the policy is not limited to foreign manufacturers, the lack of response from global players underscores the importance of aligning central incentives with on-the-ground realities faced by the EV industry.