Moreover, the regulations mandate that beneficiaries must disclose their sources of components and inform the Ministry of Heavy Industries (MHI) of any changes. The rules also grant the Centre the right to recover any subsidies wrongfully obtained under the scheme.
The government has recently tightened localisation norms for electric vehicle (EV) manufacturers seeking subsidies under the Prime Minister’s Electric Drive (PM E-DRIVE) scheme. This move is part of a broader effort to increase domestic manufacturing and reduce reliance on imported components in the rapidly growing EV industry.
Under the new regulations, testing agencies are empowered to conduct inspections of the facilities of EV component suppliers that provide parts to companies benefiting from the scheme. This measure is intended to verify compliance with localisation requirements and ensure that the components used in EV production are genuinely manufactured within the country.
Beneficiaries of the PM E-DRIVE scheme are now mandated to disclose the sources of their components. They must inform the Ministry of Heavy Industries (MHI) of any changes in their supply chain, enhancing transparency and accountability. This requirement aims to prevent the misuse of subsidies and allows the government to reclaim any financial support that has been wrongfully obtained.
A senior official emphasised that all EV parts must be procured domestically, and certain components will be subject to safety testing. Testing agencies have the discretion to verify assembly stations to ensure that manufacturing processes meet the prescribed standards. This includes the authority to inspect assembly lines and confirm that specified manufacturing activities are being conducted on-site.
According to the latest rules, part suppliers must adhere to localisation norms that equate assembly with manufacturing. This approach is encapsulated in the new Phased Manufacturing Programme (PMP) for EV components, which will come into effect on April 1, 2025. The PMP is designed to progressively increase domestic value addition in the EV sector by encouraging manufacturers to invest in local production capabilities.
Testing agencies are also granted the discretion to examine invoices further down the supply chain. This allows them to ascertain whether EV manufacturers are fully complying with PM E-DRIVE requirements. By scrutinizing financial records, the agencies can detect any attempts to circumvent localisation norms through indirect sourcing of imported components.
To reinforce these localisation efforts, the import of completely knocked down (CKD) kits comprising all child parts for components from a single foreign source will no longer be permitted. This restriction is aimed at fostering a robust domestic supply chain and discouraging practices where minimal assembly is conducted locally on imported kits.
During inspections by testing agencies, suppliers are required to demonstrate that their assembly stations are actively performing specified manufacturing and assembly activities at their production facilities. This provision ensures that suppliers are genuinely engaged in manufacturing processes rather than merely assembling imported parts, thereby contributing to the development of domestic manufacturing expertise.
Effectively, the government seeks to eliminate “trader businesses” from the EV supply chain—entities that import finished components and supply them to PM E-DRIVE beneficiaries without significant value addition through local manufacturing. By prohibiting domestic suppliers from importing finished components for the scheme, the government aims to promote genuine manufacturing activities and technological development within the country.
The PM E-DRIVE scheme, much like its predecessor, the Faster Adoption and Manufacturing of Electric Vehicles (FAME) initiative, is designed to encourage the sale and use of locally manufactured EVs. By imposing stricter localisation norms, the government intends to strengthen the domestic EV industry, enhance self-reliance, and stimulate economic growth through increased manufacturing activities.
These new regulations represent a significant step towards creating a more self-sufficient EV ecosystem in the country. They are expected to reduce dependency on imports, encourage investment in local manufacturing infrastructure, and promote technological innovation. Manufacturers are anticipated to respond by expanding their domestic operations, thereby contributing to job creation and the overall development of the EV sector.
In summary, the government’s enhanced localisation norms under the PM E-DRIVE scheme are a strategic move to ensure that subsidies and incentives directly support domestic manufacturing. By enforcing transparency in the supply chain and empowering testing agencies with greater oversight, the government aims to cultivate a thriving EV industry rooted in local production, which is essential for the nation’s long-term economic and technological advancement.
