Overview of the New EV Policy
The Ministry of Heavy Industries has introduced a new electric vehicle (EV) policy known as the ‘Scheme to Promote Manufacturing of Electric Passenger Cars in India’ (SPMPCI), which significantly decreases the import duties on electric vehicles from 110 percent to just 15 percent. This reduction aims to attract global EV manufacturers and encourage local production of electric cars.
Key Features of the SPMPCI
- Car manufacturers must invest Rs 4,150 crore and meet specific criteria.
- Each approved manufacturer can import up to 8,000 premium EVs annually at the reduced tax rate.
- Interest expressed by major automakers including Volkswagen, Kia, Hyundai, and Skoda.
Details of the Import Duty Reduction Policy
Investment Requirements
To benefit from the reduced import duties, eligible car manufacturers are required to invest Rs 4,150 crore (approximately $500 million) within three years. This investment affirms their commitment to manufacturing electric vehicles in India. Companies can establish assembly operations at existing plants, while expenses related to prior investments and land/buildings will not be included in the assessed initial investment. The reduced duties are set to be in effect for five years.
Additionally, participating manufacturers must hit annual turnover targets: Rs 2,500 crore by year two, Rs 5,000 crore by year four, and Rs 7,500 crore by year five. During this period, they are also expected to set up local production facilities by the end of year three and achieve 25 percent local value addition, eventually increasing this to 50 percent by the end of five years.
Import Quota for Tariff Benefits
The reduced import duty will apply to a maximum of 8,000 premium EVs (priced above USD 35,000) each year; any units beyond this limit will incur the original 110 percent tariff. Total savings from this policy are capped at Rs. 6,484 crore or the actual investment amount, whichever is lesser. Unused quotas can be carried forward to subsequent years.
Moreover, the government has clarified that investments in manufacturing equipment, research and development facilities, charging infrastructure (up to 5 percent of total investment), and land/buildings (up to 10 percent if part of the main manufacturing facility) will count toward the initial required investment. An online portal for submissions related to SPMPCI will be established soon, with approval letters for compliant manufacturers expected to start being issued from August 2025.
Interest From Carmakers in EV Import Duty Reductions
Stance of Tesla on Manufacturing in India
According to HD Kumaraswamy, the Minister of Heavy Industries, several automakers including Hyundai, Kia, Mercedes-Benz, Skoda, and Volkswagen have formally expressed their interest in participating in the SPMPCI policy. However, Tesla has reportedly not shown interest in establishing manufacturing operations in India. Expected to enter the Indian market in 2025, Tesla is likely to face the full 110 percent tariff upon its arrival.
Kumaraswamy noted, “Companies like Mercedes-Benz, Volkswagen, Skoda, Hyundai, and Kia have shown formal interest. However, we do not expect Tesla to participate in manufacturing; their intent is to open showrooms without local production.”
The minister also indicated that SPMPCI applications will only be accepted from manufacturers achieving a minimum of Rs 10,000 crore in annual revenue from automotive production and having at least Rs 3,000 crore in global assets.
