Key Points

In March 2024, the Government of India approved the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI).

The scheme allows approved applicants to import fully built electric four-wheelers (CBUs) with a minimum CIF value of USD 35,000 at a reduced customs duty of 15 per cent for five years, provided they commit to a minimum investment of Rs 4,150 crore (USD 500 million) in setting up domestic manufacturing.

Companies must achieve at least 25 per cent domestic value addition (DVA) within 3 years and 50 per cent within 5 years, using the standards set under the PLI Auto Scheme.

The total benefit under the scheme is capped by either the committed investment or a maximum duty foregone limit of Rs 6,484 crore, whichever is lower.

Today's guidelines provide detailed operational instructions and launch the long-awaited application process.

A formal Notice Inviting Applications will soon open a 120-day (or longer) window for companies to apply online.

The guidelines clarify that only new plant, machinery, equipment, R&D, and certain building costs (within limits) count toward investment; land costs are excluded, and charging infrastructure costs are capped at 5 per cent of the committed investment.

Eligibility criteria require applicants to demonstrate minimum global automotive revenues of Rs 10,000 crore and global fixed assets of at least Rs 3,000 crore, ensuring only established players can qualify.

"While announcement of the scheme guidelines is a positive step, the application process has not yet opened and is expected soon. Realistically, it may take another six months or more before selected firms are announced, and the first locally made EVs under this scheme are still some time away; for now, approved firms can keep importing fully built cars at the reduced 15 per cent duty," Ajay Srivastava, Founder of Global Trade Research Initiative, said.

"Top Indian companies like Tata Motors and Mahindra and Mahindra are likely to qualify for the scheme but will still need to invest in new plants to fully benefit. Other Indian EV makers like Ola Electric, Ather Energy, Bajaj Auto, Wardwizard, and EKA Mobility may not yet meet the tough eligibility rules," Srivastava added.

At the same time, the India-UK Free Trade Agreement (FTA) has cut import duties on premium EVs from the UK from over 100 per cent to 10 per cent over the next few years.

"Looking ahead, any serious investment in India's EV sector must account not only for domestic incentives but also for the country's sweeping market openings under FTAs with the UK, USA, and EU -- reshaping the competitive landscape for years to come," Srivastava opined.

Earlier today, speaking at a press conference, Union Minister for Heavy Industries HD Kumaraswamy said the scheme was a clear manifestation of Prime Minister Modi's commitment to green growth and industrial transformation.

"Under the Prime Minister's visionary leadership, India is taking bold strides toward net zero by 2070 while ensuring that economic development, technological progress and employment generation go hand in hand," the minister said.

Union Minister H.D.Kumaraswamy said "as a safeguard, companies must furnish a bank guarantee equal to the greater of Rs 4,150 crore or the total customs duty they are exempted from over the scheme period. This guarantee must remain valid throughout the tenure of the scheme and will serve as a financial assurance of compliance with investment and localisation targets."

- ANI