Big import duty cuts for EV makers to spur local production

New Delhi: The Centre on Monday announced a new electric vehicle (EV) policy that seeks to lower tariffs on imports and incentivise local manufacturing.

The Ministry of Heavy Industries announced detailed guidelines for its electric car manufacturing policy, the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI). The Government of India had earlier approved the policy which was first announced on March 15, 2024.

The guidelines allow global manufacturers to import a limited number of fully built EVs valued at $35,000 or more at a concessional duty rate of 15% compared to the current 70%. In exchange, companies must commit to investing at least Rs 4,150 crore, or approximately $486 million, and begin producing electric passenger vehicles locally within three years of receiving approval.

Announcing new the guidelines, Heavy Industries Minister H D Kumaraswamy called the policy a strategic move to make India a manufacturing base for EVs for foreign and domestic firms.

Approved companies will be permitted to import up to 8,000 vehicles annually at the reduced tariff. Any unused quota may be carried over to subsequent years. The total benefit derived from the lower duties has been capped at Rs 6,484 crore or the actual investment made, whichever is lower.

To qualify, applicants must belong to corporate groups with at least Rs 10,000 crore in annual revenue from automotive manufacturing and a minimum of Rs 3,000 crore in fixed assets. A non-refundable application fee of Rs 5 lakh will apply. The ministry said it will accept applications for at least 120 days starting this month, with a final deadline of March 15, 2026, although new windows may be opened at the government's discretion.

Approved applicants will be required to set up manufacturing facilities and start operations within that time. The scheme also mandates achieving a minimum domestic value-addition of 25% within three years and 50% within five years.

The scheme includes provisions for investment in new plant, machinery, associated utilities, and R&D. Expenditure on land will not be considered, though plant buildings and utilities (up to 10% of committed investment) and EV charging infrastructure (up to 5%) will qualify.

Kumaraswamy said, "As a safeguard, companies must furnish a bank guarantee equal to the greater of Rs 4,150 crore or the total customs duty they are exempted from over the scheme period. This guarantee must remain valid throughout the tenure of the scheme and will serve as a financial assurance of compliance with investment and localisation targets."

Only expenses on new plant, machinery, equipment, and R&D will be considered toward the investment commitment. Land costs are excluded, while buildings can account for up to 10%, and charging infrastructure up to 5% of the committed investment.

EV boost * Firms can import up to 8,000 vehicles annually at reduced tariff * Unused quota may be carried over to subsequent years * Total benefit from the lower duties has been capped at Rs 6,484 crore

Tesla not keen on making in India: HDK Union Heavy Industries Minister H D Kumaraswamy said on Monday thatglobal EV giant Tesla is not interested in manufacturing cars in India but keen only on establishing showrooms in the country.