India Gears Up to Invite Applications for Electric Car Manufacturing – Will Tesla Participate?

The Indian government is gearing up to invite applications under the Scheme for the Promotion of Manufacturing Electric Cars in India, which aims to attract global original equipment manufacturers (OEMs) by offering a 15% concessional import duty, significantly lower than the existing 70% rate.

Announced in March last year, the scheme has undergone extensive consultations with industry stakeholders. The Ministry of Heavy Industries, responsible for overseeing the initiative, has now drafted implementation guidelines, which are open for feedback.

According to a news report, the government is likely to begin accepting applications as early as late March or early April.

Eligibility and Investment Criteria

Under the proposed guidelines, both greenfield and brownfield investments will qualify for the scheme. However, to participate, companies must commit a minimum investment of $500 million (approximately ₹4,150 crore), regardless of whether they set up new facilities or expand existing ones.

A portion of this investment—5%—can be allocated towards charging infrastructure, ensuring that the ecosystem for electric vehicles (EVs) develops alongside manufacturing capabilities.

Revenue Targets and Compliance Requirements

Participating companies must meet specific revenue milestones:

• ₹5,000 crore by the 4th year of operations
• ₹7,500 crore by the 5th year of operations

Failing to meet these benchmarks could result in penalties ranging from 1% to 3% of the revenue shortfall. To oversee implementation, an inter-ministerial sanctioning committee will be established to monitor compliance and grant approvals.

Tesla’s Participation Remains Uncertain

According to a news report, Tesla has not taken part in recent stakeholder discussions regarding the scheme. While the government has received expressions of interest from multiple global and domestic OEMs, Tesla remains absent from these discussions.

That said, with the scheme set to open soon, the government remains optimistic that Tesla, along with other global automakers, may still apply.

Import Duty Concessions and Domestic Manufacturing

The scheme also defines eligibility for duty concessions on imported vehicles. Any participating OEM can apply for lower import duties on cars priced at $35,000 (₹30 lakh) or more (Cost, Insurance, and Freight – CIF value).

If approved, the company can import up to 8,000 cars annually at a reduced 15% duty rate. However, this benefit comes with a key requirement: the company must commence local manufacturing within 3 years and achieve a domestic value addition (DVA) of 25% within this timeframe. The DVA must increase to 50% by the 5th year of operation.

Impact on Electric Car Pricing in India

As per estimates, if a carmaker secures approval under this scheme, pricing for imported electric vehicles could become more competitive:

• A $35,000 (₹30 lakh) imported EV would cost around ₹36 lakh after factoring in concessional duties and a 5% GST rate.
• A $50,000 (₹42 lakh) imported EV would cost approximately ₹52 lakh under the same conditions.

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