India Cuts EV Import Tax to 15% to Attract Global Carmakers

With a new EV policy that cuts import taxes to 15%, India hopes to draw in international automakers and increase domestic manufacture of EVs by committing to large investments and production.

The ‘Scheme to Promote Manufacturing of Electric Passenger Cars in India’ (SPMEPCI), a new strategy by the Ministry of Heavy Industries, is a significant step to increase the production and uptake of EVs. In an effort to get international manufacturers to engage in India’s EV ecosystem, the plan drastically lowers import tariffs on electric vehicles from 110% to 15%.

Incentives based on investment

Automakers must pledge to invest at least Rs 4,150 crore (about $500 million) in Indian electric car manufacturing within three years in order to qualify for the lower import tariff. Although prior investments and land/building costs are not included in the required investment threshold, the policy permits enterprises to utilize their current production facilities.

As long as each imported electric car costs more than $35,000 (about Rs 30 lakh), the lower 15% customs charge would be applied for five years and capped at 8,000 automobiles per year. The overall benefits are restricted to Rs 6,484 crore or the actual investment made, whichever is less. The annual quota is variable, allowing for the rollover of unused units.

Manufacturing goals and benchmarks

The following performance goals must be fulfilled by participating automakers:

• By the second year, the annual turnover was Rs 2,500 crore.
• By the fourth year, Rs 5,000 crore, and
• By the fifth year, it will be Rs 7,500 crore.

Additionally, businesses need to:

• By the third year, establish local manufacturing facilities.
• By the third year, attain a local value addition of 25%, and
• By the fifth year, raise this to fifty percent.

R&D, equipment, and charging infrastructure are among the permitted investment costs (up to 5% of the total expenditure). Up to 10% may be made up of real estate and structures used specifically for manufacturing.

A number of international automakers, including Hyundai, Kia, Mercedes-Benz, Skoda, and Volkswagen, have already indicated interest in taking use of the program’s advantages, according to Heavy Industries Minister HD Kumaraswamy.

Tesla is unlikely to engage in local production, though. The American EV company reportedly intends to merely open showrooms and import vehicles, subjecting its offerings to the entire 110% import tariff, despite its much anticipated 2025 debut into the Indian market.

“It is not anticipated that Tesla will make production investments here. “They probably just start with showrooms,” Kumaraswamy stated.

Qualifications for eligibility

Carmakers must fulfill the following international financial standards in order to be eligible for the program:

• At least Rs 10,000 crore in car sales per year

• Fixed assets worth at least Rs 3,000 crore.

It is anticipated that an online application site for SPMEPCI will soon launch, and acceptance letters will be sent out starting in August 2025.

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