India can extend EV concessions to Chinese firms that pass stricter FDI test, says official

The government on June 2 notified the EV policy allowing companies to import a limited number of electric cars at a concessional import duty of 15 percent subject to certain riders

India is not averse to extending concessions to Chinese companies under its electric vehicle (EV) policy if they follow and pass the stricter foreign direct investment (FDI) norms, as laid out in the Press Note 3, a senior government official has told Moneycontrol.

“Chinese EVs can invest in India if it comes through the Press Note 3. They can apply and get permission through that, and once they get permission they can also come in through the notified EV scheme,” the official said.

There is speculation that India may go slow on approving investments from China, given the nation’s role in aiding Pakistan during the recent military clash with India.

India’s auto industry, especially electric vehicle makers, is also expected to face disruptions supplies of rare earth magnets run low. Beijing has gone slow on export permissions for seven of these critical elements.

The automotive industry has also requested the government to fast track the approval process for imports of rare earth magnets from China, essential in passenger vehicles and various automotive applications.

The government on June 2 notified the EV policy, allowing companies to import a limited number of electric cars at a concessional import duty of 15 percent subject to certain riders like a minimum investment of Rs 4,150 crore.

The scheme was first announced in March 2024 but was later modified by the heavy industries ministry to make it more attractive for major automakers and tighten eligibility norms.

Applications for the scheme are to open this month on the ministry website with a window of at least 120 days.

The ministry will also have the right to open the application window, as and when required till March 15, 2026. A non-refundable application fee of Rs 5 lakh will be payable by the applicant while filing the form.

“Once the portal opens, all global players are welcome to apply. There is no stopping anyone from coming in and utilising the scheme,” the official cited above said.

India has always been more cautious while approving any investments from China.

The Centre amended the FDI policy, specifically by way of Press Note 3 in April 2020, to curb opportunistic takeovers or acquisitions of Indian companies, making it tougher for certain nations such as China to invest in India.

An entity of a country sharing land border with India or where the beneficial owner of an investment in India is situated in or is a citizen of any such country, can invest only through the government route.

Therefore, any investment proposal from the Chinese or other nations sharing land borders faces detailed scrutiny and can come in only through the government route.

China is the leader in the global EV market in production, sales as well as exports.

As per International Energy Agency (IEA), Beijing is the largest producer of electric vehicles and a leading exporter of electric cars, representing over 35 percent of outbound shipments in 2022.