India Releases Guidelines for Electric Car Manufacturing Scheme

The Ministry of Heavy Industries has issued detailed guidelines for its Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMPCI), outlining how global automakers can access reduced import duties while establishing local manufacturing operations.

The scheme, first announced in March 2024, targets electric passenger car manufacturers with specific investment requirements and timeline commitments. It represents a shift from India's broader automotive incentive programs toward sector-specific policies focused on electric vehicles.

Companies seeking to participate must commit to investing a minimum of Rs. 4,150 crore (approximately USD 500 million) within three years of approval. This investment must go toward establishing manufacturing facilities and operations for electric passenger cars within India.

The policy is designed to attract established global manufacturers rather than startups, with eligibility criteria requiring companies to have significant existing automotive operations and financial capacity.

Import Duty Relief Structure

The scheme's primary incentive is a reduction in customs duties for imported electric vehicles. Approved companies can import fully-built electric cars valued at USD 35,000 or more at a 15% duty rate, compared to the standard higher rates.

The import allowances come with caps:

• - Maximum 8,000 vehicles per year at reduced rates
• - Five-year period for the duty benefits
• - Total duty savings capped at Rs. 6,484 crore or actual investment, whichever is lower
• - Unused annual quotas can be carried forward

Localization Requirements

Participating companies must gradually increase domestic content in their manufacturing:

• - 25% domestic value addition within three years
• - 50% domestic value addition within five years

These targets aim to ensure that the import duty benefits translate into genuine technology transfer and local supply chain development, rather than serving as permanent subsidies for imported vehicles.

To ensure companies follow through on their commitments, the scheme requires a bank guarantee equal to either the total duty savings or Rs. 4,150 crore, whichever is higher. The guarantee must remain valid throughout the scheme period and will be forfeited if companies fail to meet investment or localization targets.

What Counts as Investment

The guidelines specify which expenditures qualify toward the investment commitment:

• - Manufacturing equipment and machinery
• - Research and development facilities
• - Charging infrastructure (up to 5% of total investment)
• - Land and buildings (limited to 10% of investment if part of main manufacturing facility)

The ministry plans to launch an online portal for submissions and will use existing procedures from the PLI automotive scheme to evaluate domestic value addition claims.

Certification of local content will be handled by government-approved testing agencies, following established protocols from other automotive incentive programs.

Market Context

The policy builds on India's existing automotive incentive framework but narrows the focus specifically to electric passenger cars. Unlike the broader PLI scheme for automotive components, SPMPCI targets finished vehicle manufacturing by companies with substantial global operations.

India's electric passenger car market remains small compared to two-wheelers and three-wheelers, which have seen faster adoption due to lower costs and simpler charging requirements. The new scheme appears designed to accelerate four-wheeler adoption by reducing the cost barrier for global manufacturers to test the Indian market while building local capacity.

Implementation Timeline

Key deadlines under the scheme:

• 3 years: Manufacturing operations must commence
• 3 years: 25% domestic value addition target
• 5 years: 50% domestic value addition target

Policy Implications

The scheme reflects the government's approach of using temporary import duty relief to encourage longer-term manufacturing investments. Rather than permanent tariff reductions, it offers time-limited benefits tied to specific performance milestones.

For global automakers, the policy provides a way to test Indian market demand for higher-end electric vehicles while building the manufacturing base needed for longer-term operations. The substantial investment requirements suggest the government is targeting companies planning significant, long-term commitments rather than short-term market entry strategies.

The focus on electric passenger cars also aligns with India's climate commitments, though the scheme's immediate impact will depend on how many global manufacturers decide the market opportunity justifies the required investment levels.

Applications are expected to open in the coming weeks once the online portal becomes operational.