India's New EV Policy Offers Duty Cuts to Attract Global Car Manufacturers

The Indian government will soon begin accepting applications under a new policy designed to attract global electric vehicle (EV) manufacturers. The policy, announced in March 2024, offers reduced import duties for companies willing to invest in local manufacturing.

Policy Details

The scheme allows eligible companies to import up to 8,000 EVs per year at a reduced customs duty of 15%. This applies to vehicles priced at $35,000 or more. In exchange, the manufacturer must invest at least ₹4,150 crore (approximately $500 million) to set up a production facility in India within 3 years.

Eligibility and Revenue Conditions

To qualify, companies must meet revenue requirements once production begins. In the 4th year, approved firms are expected to report at least ₹50 billion in revenue. In the 5th year, this rises to ₹75 billion. Failure to meet these targets could result in a penalty of up to 3% on the revenue gap.

Application Window

According to the news reports, the government is likely to open the application process within this month. The window will remain open until March 15, 2026. The Ministry of Heavy Industries has not issued an official statement.

Context and Global Interest

This initiative follows years of discussions around India’s high import duties on electric vehicles. Tesla, which had previously expressed interest in entering the Indian market, has been critical of the earlier duty structure. However, the company is unlikely to participate under the current policy, citing a preference for selling imported cars rather than manufacturing locally.

Other companies, such as VinFast, have already started building a plant in India. BYD, a Chinese EV firm, is not expected to be considered due to existing regulatory and diplomatic concerns.

Read more: EV Makers Seek Centre’s Help as China Halts Magnet Exports. 

Conclusion

The policy plans to encourage investment in domestic EV production by offering temporary import duty relief tied to manufacturing commitments. Applications are expected to open soon, with stricter eligibility rules in place to ensure compliance.

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