India Launches New EV Policy To Push Local Manufacturing, Slash Import Duties

The central government has announced that global EV manufacturers can import vehicles at a significantly reduced customs duty of 15 per cent

Despite speculation, Tesla is unlikely to commence local manufacturing in India soon

Source : Pexels

India has officially launched its flagship electric vehicle (EV) policy aimed at enticing global automakers to invest and produce locally. This updated policy, building on proposals made in March 2024, introduces clearer guidelines and incentives designed to expand India’s EV ecosystem.

The central government has announced that global EV manufacturers can import vehicles at a significantly reduced customs duty of 15 per cent, a steep drop from the existing 70-110 per cent tariff on foreign cars. This concession applies only to EVs priced at $35,000 (approximately Rs 30 lakh) or less. However, the manufacturers must commit to a minimum investment of Rs 4,100 crore ($486 million) to establish local manufacturing facilities within three years of receiving government approval. Production is also expected to commence within this timeframe, ensuring tangible progress in domestic EV output.

Currently, each brand is permitted to import up to 8,000 units annually under this policy. If a company does not fully utilise this quota, it can carry forward the balance to subsequent years, providing flexibility for market entry strategies.

Stricter Eligibility And Domestic Value Addition Criteria

To qualify for the scheme, companies or consortia must demonstrate an annual automotive manufacturing revenue of at least Rs 10,000 crore and maintain fixed assets worth Rs 3,000 crore. Importantly, manufacturers are required to achieve a minimum of 25 per cent domestic value addition within three years, increasing to 50 per cent within five years. The policy emphasizes investment in research and development, plant infrastructure, machinery, and equipment, excluding land costs. Additionally, expenses related to building infrastructure and EV charging facilities are capped at 10 per cent and 5 per cent of the total investment, respectively.

Application Window And Market Impact

The application window for this policy is set to open soon and will remain active for at least 120 days. Depending on demand from international manufacturers, the government may extend this window up to March 15, 2026.

Tesla and BYD: The Exceptions?

Despite speculation, Tesla is unlikely to commence local manufacturing in India soon, as clarified by Minister of Heavy Industries and Public Enterprise, H.D. Kumaraswamy. Tesla plans to sell imported cars subject to full import duties, as the brand’s primary Indian clientele comprises affluent buyers attracted by brand prestige rather than broad market demand. Moreover, Tesla’s need for an extensive supercharger network represents a considerable investment that the company has not committed to in India.

Similarly, BYD—the Chinese EV giant with strong manufacturing capabilities—is currently sidelined due to stringent policy conditions, delaying its entry into the Indian market.

Domestic Players And Future Outlook

With Tesla and BYD out for now, competition among domestic and other global EV manufacturers like Mercedes-Benz, Volkswagen India, and Hyundai is expected to intensify moderately. Vietnamese EV maker VinFast is close to completing its plant setup in India, although it faces challenges such as premium pricing and limited brand recognition, which may limit its market impact.

Minister Kumaraswamy emphasized the policy’s focus on strengthening local manufacturing capabilities and supporting India’s ambitious goal of achieving net-zero emissions by 2070. While stringent conditions may slow immediate investment, the government hopes to foster a competitive and sustainable EV manufacturing environment in the long term.