Proposed India EU trade deal may lower EV import duties, prompting government to rethink incentives under its manufacturing scheme.
The government is considering changes to its incentive scheme for electric passenger car manufacturing as negotiations on a free trade agreement between India and the European Union gather pace, according to a report by The Economic Times.
The review is being contemplated as a potential India EU FTA could lower import duties on electric vehicles, reducing the appeal of the current incentive framework for global EV manufacturers to set up production facilities in India. Officials believe the existing structure may need reworking to remain competitive if tariff concessions become available through trade agreements.
The Scheme to Promote Manufacturing of Electric Passenger Cars in India was approved by the Centre in March 2024 but has not received a single application so far. Companies have raised concerns over uncertainty linked to the India EU trade talks as well as China’s restrictions on the export of rare earth magnets, which are critical components for EV manufacturing.
A senior government official told the newspaper that duty concessions alone may not be sufficient to attract investment once the FTA is finalised. Automakers have reportedly conveyed that if similar tariff benefits are available without mandatory investment commitments, the scheme may lose relevance. High investment thresholds and tight timelines have also been flagged as deterrents.
SPMEPCI allows selected companies to import electric passenger cars at a concessional customs duty of 15% for five years, provided they commit to investing at least ₹41.50 billion in local manufacturing. The scheme aims to position India as a major EV manufacturing hub, create jobs and support clean mobility goals, including the Net Zero target for 2070.
