New EV Scheme Paves Way for Global Auto Majors to Invest in India

India has introduced a scheme aimed at promoting the domestic manufacturing of passenger vehicles, with a specific emphasis on electric vehicle production. The initiative seeks to establish India as a global hub for automotive innovation and EV manufacturing.

India’s central government has unveiled a finalized policy framework to promote electric vehicle (EV) adoption and manufacturing in the country. As per the official announcement made on June 2, 2025, the initiative, called the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), targets investment in infrastructure, including research and development, and a limited scope for charging infrastructure.

India anticipates that the policy will attract substantial foreign investment, facilitate technology transfer, and contribute to building a robust local EV supply chain.

Investment requirements under India’s EV manufacturing scheme

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The Union Ministry of Heavy Industries (MHI) first announced the SPMEPCI on March 15, 2024. On the same day, India’s Department of Revenue, under the Ministry of Finance, issued a notification enabling reduced customs duties in accordance with the EV manufacturing scheme. 

To qualify for the scheme’s incentives, participating companies are required to invest a minimum of INR 41.50 billion (US$485.9 million) within three years from the date of approval. Moreover, investments must be directed toward the domestic manufacturing of eligible e-passenger vehicles.

In the case of brownfield projects, the upgraded or new facilities must be physically demarcated from existing manufacturing units. This is to distinguish the projects clearly for audit and compliance purposes.

The policy also mandates a phased increase in domestic value addition (DVA) in the manufacturing process. The implementation timeline is as follows:

• Three years: Manufacturing operations must commence
• Three years: 25 percent DVA target
• Five years: 50 percent DVA target

Guidelines for DVA assessment

These targets aim to ensure that the import duty benefits translate into genuine technology transfer and local supply chain development, rather than serving as permanent subsidies for imported vehicles.

The assessment of DVA for eligible products manufactured under the scheme will follow the Standard Operating Procedure (SOP) established under India’s Production Linked Incentive (PLI) scheme for automobiles and auto components.

1. DVA certification will be carried out by testing agencies approved by the Ministry of Heavy Industries (MHI).
2. Only products manufactured in India by approved applicants will be eligible for DVA certification.

Expenditures norms under the scheme

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Eligible investments under this manufacturing scheme include the establishment or expansion of manufacturing facilities, acquisition of plants and machinery, research and development activities, and associated infrastructure.

However, expenditures on land are excluded from qualifying investments. Construction costs for buildings that are part of the core manufacturing plant may be included but are capped at 10 percent of the total committed investment. Additionally, investments in charging infrastructure are permitted up to 5 percent of the overall investment.

To ensure companies follow through on their commitments, the scheme requires a bank guarantee equal to either the total duty savings or INR 41.50 billion (US$485.9 million), whichever is higher. The guarantee must remain valid throughout the scheme period and will be forfeited if companies fail to meet investment or localization targets

Eligibility criteria

Participating companies must meet the following financial thresholds based on their latest audited financial statements:

1. Global group* revenue: The company (or its group) must have generated a minimum annual revenue of INR 100 billion (US$1.17 billion) from automotive manufacturing.

2. Global investment in fixed assets: The company (or its group) must have invested at least INR 30 billion (US$351.29 million) in fixed assets (such as buildings, machinery, and equipment).

Note: A group company refers to two or more businesses where one holds 26 percent or more voting rights in the other, directly or indirectly.

Application process

The MHI will open an application window for a period of 120 days or more, during which interested companies can submit their applications under the scheme. MHI also reserves the right to reopen the application window as needed, at any time up to March 15, 2026.

Applicants will be required to pay a non-refundable application fee of INR 500,000 (US$5,854.9) at the time of submission.

The official notice inviting applications is expected to be released in two weeks. Once published, prospective applicants will be able to submit their applications online via the MHI’s official website.

Import duty concessions for approved applicants

To incentivize foreign investment in India’s EV sector, the scheme provides customs duty concessions for approved applicants under specific conditions.

Approved companies are permitted to import completely built units (CBUs) of electric four-wheelers (e-4Ws) with a minimum cost, insurance, and freight (CIF) value of US$35,000. This will be at a reduced customs duty rate of 15 percent. This concessional rate will be applicable for a period of five years from the date of application approval. Import limits and conditions are as follows:

• A maximum of 8,000 vehicles per year may be imported under the reduced duty rate.
• Any unused import quota from a given year can be carried forward to subsequent years.
• The total customs duty benefit availed by an applicant will be limited to the lower of the following two thresholds:
  • INR 64.84 billion (US$759.27 million) (maximum duty foregone per applicant), or
  • The actual investment made under the scheme (with a minimum investment requirement of INR 41.50 billion/US$485.9 million).

Global carmakers keen on India’s EV scheme; Tesla unlikely to participate

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Several leading global automobile manufacturers — including Mercedes-Benz, Volkswagen, Skoda, Hyundai, and Kia — have formally conveyed their interest in participating in India’s newly launched scheme to promote domestic EV production, according to Union Minister for Heavy Industries HD Kumaraswamy.

The minister, however, has clarified that Tesla is not expected to participate in the scheme. It is to be believed the company is focused on opening showrooms rather than establishing manufacturing operations in India.

The minister emphasized that the initiative is designed to transform India into a global EV manufacturing hub while also creating employment opportunities, boosting local production, and supporting the country’s net zero emissions goal by 2070.

(US$1 = INR 85.39)

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