India Cuts EV Import Duty to 15% for Local Manufacturing Push
In a bid to accelerate its transition to electric mobility and attract global automotive investments, the Indian government has rolled out a new electric vehicle (EV) policy that sharply reduces import duties for companies willing to commit to domestic manufacturing. The move is part of India’s broader strategy to become a competitive global hub for EV production.
Reduced Duties, Increased Expectations
The centerpiece of the policy is a significant reduction in customs duty from 70% to 15% on imported electric cars. However, this concession is only available to manufacturers who commit to investing at least $500 million (around ₹4,150 crore) in setting up manufacturing facilities in India within three years. These companies will be allowed to import up to 8,000 EVs per year at the concessional rate, provided each vehicle has a minimum cost, insurance, and freight (CIF) value of $35,000.
To ensure commitment and compliance, companies must furnish a bank guarantee equal to the total amount of duty forgone or $790 million—whichever is higher. In addition, the manufacturers will be required to achieve a Domestic Value Addition (DVA) of at least 25% within three years of production commencement and ramp it up to 50% within five years.
Tesla Misses Out, Others Consider Entry
While automakers like Mercedes-Benz and Skoda-Volkswagen have reportedly expressed interest in joining the scheme, Tesla, which had earlier signaled intent to enter India, is unlikely to qualify under the current terms as it has shown no commitment to local manufacturing. Instead, Tesla is reportedly exploring a sales-only model, which disqualifies it from the new benefits.
Meanwhile, Indian automakers such as Tata Motors and Mahindra & Mahindra have voiced concerns over the move, arguing that foreign imports—albeit limited—could undercut the momentum of domestic players who have already made substantial investments in EV infrastructure and R&D.
A Balancing Act for the EV Future
This policy represents a balancing act by the government—aimed at enticing global technology leaders while safeguarding the interests of homegrown manufacturers. By mandating both capital investment and value addition benchmarks, the initiative seeks to create a level playing field that benefits consumers, encourages innovation, and promotes long-term industrial growth.
The ultimate goal is to raise EV penetration in India from the current 2.5% of car sales to 30% by 2030—a target that will require significant manufacturing capacity, global collaboration, and sustainable incentives.
