Big push for EVs: India opens door to global carmakers with massive tax breaks & investment mandate

Time of India

2 days ago

New Delhi: The government has notified a scheme to promote the domestic manufacturing of electric passenger cars, mandating a minimum investment of ₹4,150 crore and offering a concessional import duty of 15 per cent for five years on electric four-wheelers priced at or above $35,000.
The scheme, titled "Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI)", was notified by the Ministry of Heavy Industries (
MHI
) on March 15, 2024. On the same day, the Department of Revenue, Ministry of Finance, issued a separate notification regarding reduced import duties in line with the scheme's provisions.
The MHI will shortly issue a notice inviting applications under the scheme. Prospective applicants will be able to submit their applications online.
Approved applicants will be allowed to import Completely Built Units (CBUs) of electric four-wheelers with a minimum CIF (Cost, Insurance, and Freight) value of $35,000 at a reduced customs duty of 15 per cent for a period of five years from the date of application approval.
The number of e-4Ws allowed to be imported at this reduced duty rate will be capped at 8,000 units per year, and any unutilised annual quota may be carried forward.
However, the overall customs duty foregone under the scheme will be limited to the lower of two figures—either ₹6,484 crore per applicant or the actual investment committed by the applicant, which must be a minimum of ₹4,150 crore.
Union Minister H.D. Kumaraswamy said at a press conference, 'Under the visionary leadership of Hon'ble Prime Minister Shri Narendra Modi, the Ministry of Heavy Industries has approved a forward-looking scheme to promote the domestic manufacture of passenger cars, with a special focus on electric vehicles. This landmark initiative aligns with India's national goals of achieving Net Zero by 2070, fostering sustainable mobility, driving economic growth, and reducing environmental impact. It is designed to firmly establish India as a premier global destination for automotive manufacturing and innovation.'
He added, 'The scheme is strategically crafted to position India as a global hub for electric vehicle manufacturing. With a minimum investment threshold of ₹4,150 crore, it provides an enabling policy environment for leading global and domestic players to establish long-term manufacturing footprints in the country. Through calibrated customs duty concessions and clearly defined domestic value addition (DVA) milestones, the scheme strikes a balance between introducing cutting-edge EV technologies and nurturing indigenous capabilities.'
'By mandating domestic value addition targets the scheme will further boost the 'Make in India' and 'Aatmanirbhar Bharat' initiatives, while empowering both global and domestic companies to become active partners in India's green mobility revolution,' he said.
Applicants will be required to commence manufacturing operations within three years from the date of application approval. There is no cap on the maximum investment under the scheme.
The scheme mandates a minimum domestic value addition (DVA) of 25 per cent within three years and 50 per cent within five years from the date of issuance of the approval letter by the MHI or the Project Monitoring Agency (PMA).
The DVA will be assessed using the Standard Operating Procedure issued under the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components. Certification of DVA for the eligible products will be conducted by testing agencies approved by the MHI.
Applicants will be required to make investments specifically for domestic manufacturing of eligible electric passenger vehicles. If the investment is made in a brownfield project, a clear physical demarcation with existing manufacturing facilities must be ensured.
Expenditures on new plant, machinery, equipment, associated utilities, and engineering research and development (ER&D) will be considered for calculating investment. Land costs will not be included, but buildings for the main plant and utilities will be eligible provided they do not exceed 10 per cent of the committed investment. Investments in charging infrastructure will be considered up to a limit of 5 per cent of the committed investment.
To secure compliance with the scheme's conditions, the applicant will be required to furnish a bank guarantee from a scheduled commercial bank in India. The guarantee must be equal to the higher of the total duty to be foregone or ₹4,150 crore and must remain valid throughout the scheme period.
The application window will remain open for a minimum of 120 days and can be reopened by the MHI as required, until March 15, 2026. A non-refundable application fee of ₹5,00,000 will be charged.
To qualify under the scheme, applicants must meet the following eligibility criteria: global revenue from automotive manufacturing of at least ₹10,000 crore and a global investment in fixed assets (gross block) of at least ₹3,000 crore based on the latest audited annual financial statements.
The scheme is intended to attract global electric vehicle manufacturers, position India as a major EV production hub, and contribute to employment generation while supporting the national goals of sustainable mobility and reduced environmental impact.