EV Sector in India: Production Capacity, Government Targets, and Market Performance

Posted by Written by Manah Popli and Melissa Cyrill Reading Time: 16 minutes

In this market brief, we explore consumer purchasing trends in the automotive market in India and its continuously growing electric vehicle (EV) production capacity. We highlight key EV industry players and their manufacturing facilities, while also delving into government incentives and goals for the evolving transport landscape.

During COP26, India unveiled its ambitious decarbonization target for 2030. This entails reducing carbon emissions in the energy sector by 50 percent and attaining 500 gigawatts of renewable energy generation capacity by the year 2030, while also becoming a part of the global EV30@30 campaign. To achieve this, India aims to triple its current renewable capacity, with the EV30@30 campaign specifically targeting the goal of ensuring that electric vehicles (EVs) account for at least 30 percent of new vehicle sales by 2030.

That is a big task—at least in the passenger vehicle category. Electric cars accounted for just 1.3 percent of car sales in 2022, that is, 49,800 EVs sold out of 3.8 million passenger vehicles. Nevertheless, automakers and allied sectors remain buoyant about EV use in the near future, with traditional players and new stakeholders exploring multiple pathways to R&D and commercial production of vehicles and auto components.

Projections indicate that the Indian EV market, valued at US$2 billion in 2023 could surge to US$7.09 billion by 2025. Industry estimates also forecast the domestic EV market to achieve 10 million annual sales by 2030.

In this market brief, we discuss some of the moves underway, on the part of car makers and the government, to expand India’s EV market share for private vehicles and public transport.

READ: Full List of Approvals Released: PLI Scheme for Automobile and Auto Components Industry

India’s EV market outlook

By 2030, per a Bain & Co. report, electric two-wheelers could make up about 40 to 45 percent of all EVs sold in India, and electric passenger vehicles could make up about 15 to 20 percent. However, per a Niti Aayog report, the Indian government is aiming for EV adoption to reach 40 percent for buses, 30 percent for private cars, 70 percent for commercial vehicles, and 80 percent for two-wheelers by that timeline.

According to data from VAHAN, India’s electric two-wheeler market experienced a notable surge in sales in the third quarter of FY 2023-24 (Q3 FY 24) compared to the previous quarter (Q2 FY 24), with a 34.42 percent increase. This uptick is also reflected by the robust sales in the ongoing fiscal – Q4 FY 24 – with 76,301 units sold.

VAHAN serves as the flagship e-Governance application under India’s National Transport Project, a Mission Mode Project launched in 2006. The VAHAN portal’s primary objective is to automate RTO (regional transport office) operations nationwide, including vehicle registration, permits, taxation, and enforcement processes.

Meanwhile, the Economic Survey of India 2023 had forecast a robust 49 percent compound annual growth rate (CAGR) in India’s domestic electric vehicle market between 2022 to 2030, with an estimated 10 million annual sales by 2030. Projections indicate that the EV industry is set to generate approximately 50 million direct and indirect employment opportunities within the next seven years.

READ: Electric Vehicle Industry in India: Why Foreign Investors Should Pay Attention

Automakers currently manufacturing EVs in India

The major players in the Indian electric vehicle market are listed below. In 2023, the domestic EV market was dominated by Tata Motors (72 percent), followed by MG Motors (10.8 percent) and Mahindra (9 percent), with the top selling models being Tiago, Nexon and Tigor from Tata Motors, the MG ZS, and Mahindra XUV400. This is followed by Citroen’s eC3 EV at 3.5 percent market share.

EV production facilities in India are equipped with robotic and automated manufacturing systems for logistics and material handling, fabrication and painting, assembly, and quality assurance.

Existing EV Production Capacity in India

Company name

Location of factory / manufacturing facility

Greaves Electric Mobility Private Limited

Ranipet, Tamil Nadu

Ather Energy Private Limited

Bengaluru, Karnataka; Hosur, Tamil Nadu

ATUL Auto Limited

Shapar, Gujarat

Bajaj Auto Limited

Waluj and Chakan in Maharashtra; Pant Nagar in Uttaranchal; Akurdi in Pune, Maharashtra

Electrotherm (India) Limited

Ahmedabad, Gujarat

Hero Electric Vehicles Pvt. Ltd.

Near Ludhiana, Punjab (new facility); Mahindra facility at Pithampur, Madhya Pradesh

Hyundai Motor India Ltd (HMIL)

Sriperumbudur near Chennai, Tamil Nadu; Talegaon factory in Maharashtra (starting operations in 2025)

JBM Group

Multiple locations in India and other countries

Mahindra & Mahindra Limited

Pune, Maharashtra; Zaheerabad, Telangana

MG Motor India Private Limited

Halol, Gujarat

Okinawa Autotech International Private Limited

Bhiwadi and Karoli, Rajasthan

Olectra Greentech Limited

Seetharampur, Hyderabad – Telangana

Omega Seiki Mobility

Faridabad, Haryana; Pune, Maharashtra; and Chennai, Tamil Nadu

Piaggio & C. S.p.A.

Baramati, Pune district – Maharashtra

Tata Motors Ltd.

Tata Group facility at Sanand, Gujarat; Ford’s Sanand facility

TVS Motor Company

Hosur, Tamil Nadu

VE Commercial Vehicles Limited

Indore, Madhya Pradesh

Greaves Electric Mobility Private Limited (‘GEMPL’): GEMPL is a key player in the electric vehicle industry, contributing to the design and manufacturing of electric mobility solutions for over 13 years. In the electric two-wheeler segment (e-scooter), GEMPL has launched the “Ampere” brand, which has a strong presence in both business-to-consumer and business-to-business markets. It has a manufacturing plant at Ranipet in Tamil Nadu. GEMPL’s subsidiary and associate companies, Bestway Agencies Private Limited and MLR Auto Limited, are present in the electric three-wheeler segment.

Ather Energy Private Limited: Ather Energy is India’s fifth largest player in the segment. Founded in 2013, it is a recognized electric two-wheeler maker, headquartered in Karnataka. It has two production facilities, one in Bengaluru, Karnataka and the other at Hosur, Tamil Nadu, which is 25 miles southeast of Bengaluru. The EV plant at Hosur is set up across 400,000 sq ft at an investment of about US$99 million and can manufacture 110,000 e-scooters and 120,000 battery packs annually. Interestingly, in September, leading two-wheeler brand Hero MotoCorp said it will be investing INR 5.5 billion in Ather Energy. The company hopes to increase annual production capacity to 1.5 million from the current 420,000 units. Ather Energy is eyeing a 30-40 percent increase in market share in the next few years and has launched more affordable models.

ATUL Auto Limited: A prominent name in the electric vehicle market, specializing in the production of a diverse range of electric vehicles, including electric rickshaws and three-wheelers. Its manufacturing plant is located at Shapar, 18km from Rajkot, Gujarat, with an annual production capacity of 60,000 units on a single shift basis per the company.

Bajaj Auto Limited:  Founded in 1926, it building up its presence in the Indian electric vehicle segment, and is reportedly the world’s fourth largest manufacturer of two-wheelers and three-wheelers. The company has manufacturing plants at Waluj and Chakan in Maharashtra and at Pant Nagar in Uttaranchal. It has also commenced work at a new facility, spread over 500,000 sq ft, at Akurdi in Pune, Maharashtra, with an annual production capacity of 500,000 EVs.

Electrotherm (India) Limited: It is an emerging player in this sector. An Indian tech conglomerate, Electrotherm’s operations span various segments of manufacturing and processing, including steelmaking, foundry, heat treatment, the design and manufacturing of electric vehicles, and the renewable energy industry. The company is best known for its YO Bykes range of electric two-wheelers. Its manufacturing and export base is in Ahmedabad, Gujarat and its top export markets are Nepal, Bangladesh, Sri Lanka, Algeria, and Kenya.

Hero Electric Vehicles Pvt. Ltd.: Present in the electric two-wheeler segment, with a strong focus on producing high-quality, energy-efficient electric scooters for the Indian market. The company is now seeking to create differentiated brands and hopes to enter the premium e-bike segment under the A2B brand. It is opening a new manufacturing facility near Ludhiana, Punjab with an annual production capacity of 200,000 units. Hero Electric has a five-year partnership with the Mahindra Group, the latter of which is manufacturing its Optima and NYX electric scooters from the Mahindra facility at Pithampur, Madhya Pradesh.

Hyundai Motor India Ltd (HMIL): The South Korean company is India’s second largest car maker, and sells EV models in India under the Hyundai (example: Ioniq 5) and Kia (example: EV6) brands. The company also intends to introduce new EVs from its factory at Sriperumbudur near Chennai. HMIL has signed an MoU with the state’s government to expand capacity and establish an EV ecosystem in Tamil Nadu at an investment of INR 200 billion over 10 years. HMIL will also set up a battery pack assembly unit with an annual capacity of 178,000 units and will install 100 EV charging stations in Tamil Nadu in the next five years. HMIL plans to convert the Sriperumbudur plant into an export base for both ICE and EV cars. Besides Tamil Nadu, HMIL is expanding its Indian manufacturing presence with its acquisition of the General Motor India’s (GMI) Talegaon factory in Maharashtra, where operations will commence in 2025. The GMI plant has an annual capacity of 130,000 units. By 2032, Hyundai plans to launch five EV models in India.

JBM Group: JBM Group is actively involved in the production and supply of auto components and systems as well as electric vehicles and buses, EV aggregates, and charging infrastructure. and other electric vehicles, playing a significant role in the expansion of electric mobility in the country. It has a presence in 17 Indian cities, including Bengaluru, Hosur, Chennai, Pune, Sanand, Delhi NCR, as well as nine other countries. JBM’s international headquarters is in Germany.

Mahindra & Mahindra Limited: The Indian automaker is a small player in the electric vehicle market, with a product-centric and lifestyle oriented strategy. Despite acquiring electric carmaker Reva early on, Mahindra & Mahindra have not yet gone all in—in the EV segment. However, the company is seeking to launch multiple EV models (XUV.e, Thar.e, Scorpio.e, and Bolero.e) under the Born Electric brand between 2024 and 2025; currently its lone offering is the XUV 400. The company announced in January that it will be setting up an EV manufacturing plant in home state Maharashtra, in the city of Pune, at an investment of INR 100 billion. In addition, Mahindra & Mahindra will also set up a manufacturing facility at Zaheerabad in the state of Telangana, at an investment of INR 10 billion, to make electric three- and four-wheelers. The Telangana government is developing an EV industrial ecosystem in the state, with manufacturing clusters in Zaheerabad and Seetharampur, an energy storage system (ESS) cluster at Divitipalle in Mahbubnagar district, and an innovation cluster at Yenkathala in Vikarabad district.

MG Motor India Private Limited: The carmaker has made slow but steady strides in the Indian auto market, with two of its five offerings being EVs. The company has a manufacturing facility at Halol in Gujarat, which has an annual production capacity of 120,000 units. At present, the company sources its EV batteries from China, but has partnered with Jio-BP to set up charging stations. MG Motor India also exports to South Asian markets, including Nepal. Popular models are MG ZS and MG Comet (also called MG Air).

On October 5, The Economic Times reported that Sajjan Jindal, the chairman of JSW Group, and Shanghai-based SAIC Motor Corp had concluded the terms of their agreement for an alliance involving MG Motor India, the wholly-owned subsidiary of the Chinese automotive major that owns the British automotive brand Morris Garages. Barring any last-minute changes, the parties could make a formal announcement sometime in November and the legal documentation process is now underway. The new corporate alliance, if it comes through, plans to roll out electric cars by January 2024. Per ET’s reporting, a private company associated with Jindal will hold 32-35 percent of MG Motor India, with SAIC retaining 51 percent. An Indian financial institution will own around 8 percent, and the remaining 6-7 percent will be divided among Indian dealers of MG and its local employees. The existing losses will be offset against the equity capital of SAIC and a phased plan for the change of control will be embarked to take advantage of the tax benefits associated with loss-making companies. After the losses get wiped out, it is purported that MG Motors India will launch an IPO as an offer for sale (OFS), wherein existing investors like SAIC will sell shares. Post-IPO, the Chinese ownership is anticipated to decrease to around 38-40 percent, while Sajjan Jindal’s ownership is expected to rise to 49 percent, with a future pathway to reach 51 percent. MG held a 1.26 percent market share in the Indian passenger vehicle market in FY 2022-23. MG aims to establish a second plant at its current Halol location, targeting a production capacity of 300,000 units annually by 2028. Meanwhile the Sajjan Jindal-led JSW Group is reportedly competing with Mahindra & Mahindra and Tata Motors for Ford’s closed Chennai plant, intending to use it for electric vehicle manufacturing.

Okinawa Autotech International Private Limited: It is recognized for its electric scooters and has factories in three locations in the state of Rajasthan, in Bhiwadi and Karoli.

Olectra Greentech Limited: The company is a pioneer in electric bus manufacturing and is a dominant player in this market segment. The company has also received its battery compliance certification for all its e-buses after the government strengthened safety standards. Olectra Greentech is setting up its factory on the outskirts of Hyderabad, at Seetharampur, which will have an annual production capacity of 5,000 buses/trucks and other EVs, scalable to 10,000 units. The company has received technical support from China’s EV giant BYD. In the three-wheeler segment, Olectra Greentech has a joint venture with Etrio.

Omega Seiki Mobility (OSM): The electric mobility company is planning to manufacture green hydrogen-powered small commercial vehicles (SCV), including three-wheelers and one-tonne capacity trucks in India. To achieve this, it has partnered with a French company, Hydrogen Intelligence SA, with a subsidiary in India. The France-based company will reportedly establish manufacturing operations in Tamil Nadu, with initial plans to produce 5,000 vehicles per month and scale this up to 10,000 vehicles per month by 2026. This facility is expected to be commissioned by March 2025. Currently, the New Delhi-based OSM operates EV factories at Faridabad, Haryana state  and Chakan (Pune, Maharashtra state). OSM electric two-wheelers, three-wheelers, and trucks are utilized in the B2B segment, primarily for last mile delivery in the e-commerce sector. Omega Seiki is a separate business auto vertical of the Anglian Omega Group, which per a YouStory report is “a leading Indian maker of steel bright bar manufacturers, and has since then diversified into logistics, warehousing, entertainment, and real estate.”

Piaggio & C. S.p.A.: A key player in the three-wheeler cargo segment in India, the company has entered the L5N EV segment with its electric three-wheeler cargo model Ape Electrik. The company assembles its electric models, Ape E-City and Ape E-Xtra—which comes in both fixed and swappable battery solutions—at Baramati, Pune district in Maharashtra.

Tata Motors Ltd.: The Indian automaker is the country’s electric vehicle market leader, at a 72 percent market share, and sold 34,000 EVs in the first half of 2023. The company’s popular models are the Tata Tiago, Tata Nexon, and Tata Tigor. Tata Motors aims to launch four more EV brands in 2024 and is planning to transition 50 percent of its staff to EV manufacturing by 2027. The company has established top-of-the-line manufacturing, R&D and design facilities in more than 25 sites across India, Europe, China, UK, and North America. Tata Motors manufactures its EVs at Sanand, Gujarat and has also taken over Ford’s Sanand facility [right opposite its own] after the US automaker’s exit. In 2022, Tata Motors was manufacturing 10,000 EVs per annum at its existing Sanand factory. In June, the Tata Group announced it signed an outline deal for building a lithium-ion cell factory at a US$1.58 million investment at Sanand. This EV battery plant is reportedly expected to start operations in less than three years, per the MoU between Tata unit Agratas Energy Storage Solutions and the Gujarat government. It will have initial production capacity of 20 GWh that can be doubled in the second phase of expansion.

TVS Motor Company: From a traditional moped and two-wheeler manufacturer, TVS Motor has now made its foray into the EV space with its electric scooter. The company plans to scale up production from 50,000 units in FY 2022-23 to 100,000 units in FY 24. As of July 2023, TVS Motor held a 22 percent market share for two-wheelers, behind Ola Electric. It is the leading seller of electric bikes in Switzerland and plans to export to other parts of Europe. The company has reportedly invested US$90 million in Industry 4.0, risk modelling, IoT, and EV start-ups. TVS Motor has a dedicated EV factory at Hosur, Tamil Nadu.

VE Commercial Vehicles Limited: This is a joint venture between the Volvo Group and Eicher Motors Limited. In 2018, Eicher Trucks & Buses, which is a part of VE Commercial Vehicles, announced its entry into the electric bus segment. As per the company, VE Commercial Vehicles will integrate KPIT Technologies’ indigenously developed electrification technology, ‘REVOLO’, on its industry leading bus platform – ‘Skyline Pro’. The Skyline Pro E is manufactured at the company’s Indore plant in Madhya Pradesh. It is a 9-meter zero emission bus and caters to the smart public transport market.

Sustainability innovation in the EV sector: Integrated battery recycling and reuse

Since its establishment in 2018, Lohum Cleantech has emerged as India’s foremost producer of sustainable lithium-ion battery raw materials, employing methods such as recycling, repurposing, and low-carbon refining. The company reportedly commands a battery recycling market share estimated between 60-70 percent within India.

Lohum boasts a pioneering achievement with its patented Metelec lithium-ion battery recycling and extraction technology, which has a remarkable 95 percent material yield. This innovation significantly mitigates environmental impact by preventing up to 50 percent of CO2e emissions (90 percent through reuse) and consuming 500 times less water per ton compared to traditional mining methods. As part of its environmental commitment, the company hopes to curtail over 4 million tonnes of CO2e emissions by 2026. Notably, Lohum Cleantech stands as Mercedes-Benz Energy’s first partner in Asia.

The company’s commitment to sustainability is indicated by its recent expansion of facilities in Greater Noida, located within the Delhi National Capital Region of Uttar Pradesh state. Moreover, as reported in December 2023, Lohum will be entering the UAE market with the inauguration of its first EV battery recycling plant. This strategic move, undertaken in collaboration with the UAE Ministry of Energy & Infrastructure and the BEEAH Group, aligns with the UAE’s Net Zero by 2050 Strategic Initiative and Circular Economy Policy. Covering an area of 80,000 square feet, the Lohum JV facility pledges to recycle 3,000 tons of Lithium-ion batteries annually, repurposing 15MWh battery capacity into Energy Storage Systems (ESS).

Lohum Cleantech’s customers and partners span the globe, including regions such as the US, EU, Middle East, East Asia, and Southeast Asia. The company also establishes partnerships with battery manufacturers committed to fulfilling their Extended Producer Responsibility (EPR) obligations.

According to its website, Lohum is dedicated to propelling the energy industry towards net-zero emissions, positioning itself as a cornerstone of closed-loop Lithium-ion battery recycling and repurposing. The company aims for its operations to reduce dependency on mining for battery minerals, and is fostering a 100 percent circular supply chain characterized by transparency.

Government incentives for purchasing and manufacturing EVs

To achieve its ambitious 2030 targets, the Indian government has taken several significant steps, including incentives for local production expansion.

Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme: Initiated in 2015, the FAME scheme aims to reduce reliance on fossil fuels and tackle issues related to vehicular emissions. Currently, in its Phase II, the FAME scheme has been allotted US$1.2 billion over a 5-year span from April 1, 2019. Nearly 86 percent of the budget has been designated to boost the demand for EVs by supporting the deployment of 7000 e-Buses, 500,000 e-3 wheelers, 55,000 e-4 wheeler passenger cars (including strong hybrid), and 1 million e-2 wheelers. As of August 1, over 753,00 e2Ws were supported under FAME II. Only advanced battery and registered vehicles will be incentivized under the scheme.

Unfortunately, four top EV makers, Hero MotoCorp, TVS Motor Company, Ather Energy, and Ola Electric Technologies have been penalized for violating the FAME II guidelines and have returned part of the government incentives disbursed. These companies had sold portable chargers separately to be eligible for the FAME scheme, whose costs—over and above the ex-showroom cost of a two-wheeler—were passed on to the customers.

It remains to be seen whether the FAME scheme will be extended to phase three as there is disagreement on this between the finance and heavy industry ministries.

READ: Policies to Facilitate India’s Transition to Clean Mobility

How the FAME-II Incentive Policy Works: Key Points

The FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India) Incentive Policy aims to encourage the widespread adoption of hybrid and electric vehicles by providing demand incentives to consumers (buyers/end users). These incentives result in an upfront reduced purchase price for eligible vehicles, and the government of India reimburses the OEMs (Original Equipment Manufacturers) accordingly.

The policy extends demand incentives to the following categories of vehicles:

  1. Buses (Electric Vehicle technology exclusively)
  2. Four Wheelers (Electric, Plug-in Hybrid, and Strong Hybrid)
  3. Three-wheelers (Electric), including Registered E-Rickshaws
  4. Two Wheelers (Electric)

To ensure that high-end vehicles do not benefit from government-funded demand incentives, the policy restricts these incentives to vehicles with an ex-factory price below a specific threshold value.

OEMs must be registered with the Department of Heavy Industry (DHI) or the National Automotive Board (NAB) to be eligible for the scheme incentive for any of their manufactured models.

For vehicles to qualify for demand incentives, they must meet the following criteria:

a) They should be manufactured within India and have a specified percentage of localization, as may be notified from time to time.

b) The vehicles must conform to the provisions outlined in the Central Motor Vehicle Rules (CMVR), covering aspects such as type approval, classification, categorization, definition, road-worthiness, and registration, as per CMVR provisions.

c) The vehicles should obtain a certificate of FAME India Phase II eligibility fulfillment from recognized testing agencies.

d) Each vehicle should be accompanied by at least a three-year comprehensive warranty, including the battery, provided by the manufacturer, and the manufacturer should offer adequate after-sales service throughout the vehicle’s lifespan.

e) Suitable monitoring devices must be installed on the vehicles to track their mileage in real-time, helping to determine fuel savings accurately.

f) The vehicles should appropriately display a sticker indicating that they were purchased under the FAME-II scheme. The format of this sticker will be provided by the Department of Heavy Industry.

The demand incentives for all segments, except buses, will be disbursed through an e-enabled framework and mechanism established under the DHI. Manufacturers (OEMs) will submit their claims for reimbursement of demand incentives on a monthly basis to the Department of Heavy Industry for settlement.

State electric vehicle policies: Several Indian state governments have introduced their own policies to create an enabling environment for electric vehicle purchase and local manufacturing. Examples include Tamil Nadu, Telangana, Gujarat, Maharashtra, Haryana, Rajasthan, Chattisgarh, Odisha, to name a few.

Production Linked Incentive (PLI) Scheme for the automotive sector: This was launched in September 2021, with an outlay of US$3.1 billion to foster domestic manufacturing of advanced automotive technology (AAT) products and attract investments in the automotive manufacturing value chain. The scheme is divided into two parts: Champion OEM for electric or hydrogen-powered vehicles and Component Champions for high-value and high-tech components. It has attracted a proposed investment of US$ 9 billion against the target estimate of US$ 5.1 billion over a period of five years.

PLI Scheme for the National Programme on Advanced Chemistry Cell (ACC) Battery Storage: Launched in 2021 with an outlay of US$ 2.1 billion over seven years (including a two-year gestation period), this PLI Scheme aims to enhance India’s manufacturing capabilities for ACC production. The incentives will be disbursed over five years based on the sale of domestically manufactured batteries. Currently, three companies have been selected with a manufacturing capacity of 30 GWh, with the second phase of the scheme set to be launched soon.

Additional measures: The government has introduced additional measures to accelerate green mobility. These include:

  1. The Union Budget 2023-24 extended the exemption of customs duty to the import of capital goods and machinery required for the production of lithium-ion cells for electric vehicle batteries.
  2. The GST on electric vehicles has been reduced from 12 percent to 5 percent, and the GST on chargers and charging stations for electric vehicles has been reduced from 18 percent to 5 percent.
  3. Both commercial and private battery-operated vehicles are provided with green license plates and are exempted from permit requirements.
  4. A waiver on road tax for EVs has been introduced, reducing the initial cost of EVs for consumers.
  5. To expand and fortify the public electric vehicle charging infrastructure nationwide, the Ministry of Power has issued revised consolidated Guidelines and Standards that involve private players in the installation of EV charging stations. Oil marketing companies have also announced plans to establish 22,000 EV charging stations in major cities and along national highways across the country.

Other developments in the EV market

Retrieval of subsidies

As mentioned earlier, various leading EV brands have been asked to refund the government of their subsidies. The government had sent notices to seven companies for availing of FAME II subsidies while violating the norms of the scheme. The scheme’s localization norm mandates at least 50 percent local sourcing.

The seven companies sent notices for retrieval of the subsidy include Revolt Intellicorp, Greaves Electric Mobility, Hero Electric, Okinawa Autotech, Benling India, Lohia Auto, and Amo Mobility.

India’s position on import duties following Tesla’s expression of interest

To encourage domestic manufacturing, the Central Government is contemplating the possibility of offering companies such as Tesla a reduction in import duties on fully assembled units during the initial phases. Furthermore, the government intends to establish a policy framework for technologically advanced vehicle manufacturers, which would necessitate the incorporation of local sourcing. As part of this initiative, the import duty on environmentally friendly vehicles might be reduced significantly, potentially from 100 percent to as low as 15-30 percent, contingent upon the agreement of Indian carmakers, to initiate local production of their vehicles in India and to procure components locally.

In addition, the government will request assurances from these companies regarding the development of an ecosystem for suppliers, with an initial requirement of sourcing approximately 20 percent of the parts locally within the first two years. This percentage is expected to increase to 40 percent by the fourth year of the agreement.

Most recently, UK trade negotiators have demanded concessions in the EV sector, seeking a waiver of duties for fully assembled EVs falling within the price range of US$40,000 to US$60,000.

Starting from October 2022, the government has implemented a “faceless” approach to gather phased manufacturing plans and domestic value addition data from OEMs. This is achieved by integrating their enterprise resource planning (ERP) software with the government’s application programming interface. The purpose of this integration is to collect domestic value-addition data before the allocation of incentives under the production-linked incentive scheme for the automotive sector. Additionally, the data related to phased manufacturing plans will be gathered for the disbursement process of the Fame-II scheme.

Key takeaways

  • Though the Indian EV market is on the rise, EV penetration in India is 1.1 percent lower than the Asian average of 17.3 percent indicative of huge opportunities for EV manufacturers to achieve COP26 goals.
  • The government looks to be seriously considering ways to accommodate global EV manufacturers like Tesla, BMW, etc. for import subsidies if their localization needs are met.
  • While availing of the benefits of schemes, foreign investors are advised to meet the localization demands as the government is setting up checkpoints for verifying OEMs adheres to government policies.

This article was originally published November 9, 2023. It was last updated February 5, 2024.

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