The Indian government is taking fresh steps to renew interest in its electric vehicle (EV) import scheme, aiming to attract leading global EV manufacturers by potentially lowering import tariffs. A recent report by The Economic Times highlights how India is organizing a workshop for companies interested in importing high-end electric cars, such as Tesla, to gather feedback on the current scheme and explore reasons behind the low initial uptake.
Launched last year with much anticipation, India’s EV import scheme was designed to encourage both the import and local production of premium electric vehicles. By offering reduced import tariffs, the initiative hoped to make India an appealing market for global players in the EV industry. At the forefront of this effort was Tesla, whose founder Elon Musk previously signaled potential interest in entering the Indian market if import duties were less prohibitive. The scheme aimed to bring top-tier electric car brands to Indian consumers while simultaneously boosting local production capabilities and generating employment within the sector.
Despite the program’s high expectations, the response from manufacturers has been notably subdued. The initial reception did not match the enthusiasm that had initially surrounded the announcement. This unexpected outcome has prompted the government to reach out to stakeholders in a bid to understand their concerns and improve the scheme. As part of this effort, the government is organizing a second round of consultations, scheduled for later this month, where it will engage with industry leaders to determine what adjustments could make the policy more appealing.
The upcoming workshop will provide a platform for interested companies to understand the intricacies of the scheme, voice their feedback, and share insights on potential improvements. This workshop follows an initial meeting held in April 2024, which included several prominent automotive companies. Major industry players such as Tata Motors, Maruti Suzuki, Hyundai, BMW, and Mercedes were in attendance, alongside a representative from The Asia Group, Tesla’s advisory firm in India. Despite this collaborative environment, only a limited number of companies have shown strong interest in participating under the scheme’s current conditions.
The policy, formally known as the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), sets forth several requirements for companies that seek to benefit from reduced import tariffs. To qualify, companies must commit to a minimum investment of $500 million (approximately ₹4,150 crore) over a five-year period. This investment can be allocated toward establishing EV manufacturing facilities or building EV charging infrastructure within the country.
In addition to the financial commitment, firms must also comply with localization mandates. The scheme requires that companies achieve at least 25% domestic value addition (DVA) within the first three years of operation, increasing to 50% within five years. By setting these conditions, the government seeks to ensure that the benefits of the scheme contribute to the development of local manufacturing and value chains rather than simply promoting imports.
Under the SPMEPCI, approved companies can import electric cars with a reduced customs duty of 15% on vehicles costing $35,000 or more. This is significantly lower than the standard import duty rates, which are notably higher. Moreover, the policy allows each approved company to import up to 8,000 electric vehicles annually at this reduced rate. If a company does not fully utilize its import allowance within a given year, it can carry forward the unused quota to the following year, adding flexibility for manufacturers that may need additional time to scale operations.
Despite these incentives, several companies have expressed hesitation in committing to the program’s high investment and localization requirements. The mandated $500 million investment over five years, along with the increasing domestic value addition targets, is a considerable commitment that not all interested companies are prepared to meet. Furthermore, the limited import allowance of 8,000 vehicles annually may not be appealing enough to justify the required investment, especially for companies that primarily focus on large-scale global production.
Some industry analysts suggest that while the tariff reduction is attractive, other factors such as infrastructure, demand for premium EVs in India, and regulatory uncertainties could be contributing to the lack of enthusiasm. For instance, Tesla, a major player that the Indian government hopes to attract, may be weighing the potential profitability of the Indian market against the stringent requirements and high investment thresholds.
Recognizing these challenges, the Indian government hopes that the upcoming workshop will allow companies to provide constructive feedback and outline any additional incentives or adjustments they believe would make the scheme more attractive. This second round of consultations aims to address the concerns that companies have raised and to examine whether changes to the scheme could encourage more robust participation. The workshop is expected to explore possible revisions to the import limits, investment commitments, and localization requirements, potentially creating a more balanced approach that aligns with both the government’s goals and the operational needs of global EV makers.
The feedback and insights gathered through these consultations could play a pivotal role in shaping India’s EV policies for the coming years. With global EV giants like Tesla and VinFAST closely monitoring the scheme’s development, the government’s response to this feedback could determine India’s attractiveness as a destination for premium electric vehicles. A revised policy that considers the perspectives of industry stakeholders could bolster India’s standing in the global EV market and support the country’s ambitious goals for electric mobility and sustainability.
Conclusion
As India strives to position itself as a competitive market for premium electric vehicles, the success of the EV import scheme will depend on the government’s ability to strike a balance between incentivizing foreign manufacturers and fostering local production. The forthcoming workshop represents a critical step in refining the policy to achieve these objectives, and its outcomes may have a lasting impact on India’s journey toward electrifying its automotive sector.