With major policy changes hinging on the outcome of trade negotiations, India may slash import duties and ease investment rules to attract global EV makers.
India is likely to revise its electric vehicle (EV) policy based on the outcome of ongoing bilateral and free trade agreement (BTA and FTA) negotiations. The government is open to adjustments, depending on whether the tariff relaxations from trade deals align with those already proposed under the current scheme.
Key considerations include lowering import tariffs, possibly to zero, reducing the required investment threshold, and easing localisation norms. These changes aim to make the policy more appealing to global EV manufacturers.
Currently, under the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), foreign companies can import up to 40,000 EVs over five years at a reduced 15% duty. This is contingent on a minimum investment of $500 million and compliance with phased localisation targets.
Fully built electric cars priced above $40,000 now attract a 100% import duty in India, while those below that threshold face a 70% levy. High tariffs have discouraged several foreign automakers, including Tesla, from entering the market at scale.
Tesla’s CFO, Vaibhav Taneja, recently highlighted the issue, stating that import duties make EVs nearly double the original cost, causing customer hesitation. The US and EU have also raised concerns about these high duties in trade discussions.
However, Indian automakers are cautious, warning that tariff reductions without corresponding local investments could undermine the domestic EV ecosystem.
Final guidelines for the revised policy will be announced after trade negotiations conclude. The government has already sought input from the Commerce and Finance ministries to finalise changes, ensuring the policy reflects both trade outcomes and industry needs.
