India woos global EV makers with lower duties

India has released guidelines for its flagship policy to boost electric vehicle (EV) production in the country.

Under the scheme, first announced in March 2024, foreign firms must invest ₹4,150 crore (about $490 million) within three years from getting approval and will be allowed to import fully built electric cars worth at least $35,000 each at a lower 15% duty for five years. The duty on such cars currently ranges between 70-110%.

The maximum number of electric cars that can be imported at reduced rates under the Scheme to Promote Manufacturing of Electric Passenger Cars in India will be capped at 8,000 per year, the ministry of heavy industries said in a statement.

To be eligible, a group of firms will need to show a minimum annual revenue of Rs10,000 crore from auto manufacturing, with an annual revenue in fixed assets of at least Rs3,000 crore.

Applications for the scheme may open this month and extend till 15 March, Bloomberg reported, citing people familiar with the discussions who did not want to be named.

Union minister for heavy industries minister H.D. Kumaraswamy said the scheme is strategically crafted to position India as a global hub for electric vehicle manufacturing.

The scheme strikes a balance between introducing cutting-edge EV technologies and nurturing indigenous capabilities, Kumaraswamy said.

The scheme has mandated a minimum domestic value addition (DVA) of 25% to be achieved within three years and 50% to be achieved within five years.

“By mandating DVA targets, the scheme will further boost the ‘Make in India’ and ‘Aatmanirbhar Bharat,’ while empowering both global and domestic companies to become active partners in India’s green mobility revolution,” Kumaraswamy said.

The ministry will have the right to open the application window, as and when required, anytime till 15 March next year.

A non-refundable application fee Rs5 lakh ($5,850) will be payable by the applicant while filing the application form.

Once approved, the automaker will need to show a minimum revenue of Rs5,000 crore in the fourth year and Rs7,500 crore a year later, with those falling short likely to face a penalty of up to 3% on the revenue gap.

Meanwhile, in a press conference, Kumaraswamy said Elon Musk-led Tesla Inc., which is gearing up to start selling its cars to India, does not want to produce cars in India, but is only looking to set up two showrooms.

“Tesla… only wants to start two showrooms, they not interested in manufacturing in India,” Kumaraswamy told reporters during a press conference

Instead, automakers such as Mercedes-Benz, Kia, Hyundai, Skoda and Volkswagen are among the foreign firms that have shown interest to manufacture in the country, he added.

India’s EV sales, led by Tata Motors Ltd, made up just 2.5% of total car sales of 4.3 million last year, with the government wanting to increase this to 30% by 2030.