Big news in a push to boost domestic manufacturing and strengthen India’s position in global supply chains, the Indian government has announced the scrapping of import duties on fundamental components in manufacturing electric vehicle (EV) batteries and mobile phones. Announced on March 25, 2025, the move is part of a wider strategy to cut production costs, comply with local assembly, as well as negate the effect of potential trade challenges, including the United States’ reciprocal tariffs. Sitharaman said the policy will lead to strengthening India’s manufacturing ecosystem, and making it more competitive globally.
Duty Exemptions — What’s Included?
These are some 35 specific items deemed essential for EV battery production, and 28 components needed to produce mobile phones have been exempt from import duties now, the government has said. For EV batteries, they include raw materials and components such as lithium-ion cells, battery management systems, and other specialized components that not only constitute the backbone of electric mobility but also the automotive industry as a whole in the near future. The exempted items for the other 5G mobile phones category variable include items such as circuit boards, connectors, and other relevant assemblies that a smartphone is made of. These components were subject to different rates of customs duties and made the domestic manufacturing costlier in comparison to countries with lower tariffs.
The policy changes come amid India’s aggressive push for EV and electronics manufacturing. The government removed these cost burdens as an incentive for domestic and foreign enterprises to launch or expand production units in Turkey. The initiative is also viewed as a proactive approach to preventing a potential trade war, especially with the U.S., where President Donald Trump has threatened to impose tariffs on countries with high import barriers.
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Incentivizing Homegrown Manufacturing
Introducing the measure before voting on the Finance Bill 2025 in Parliament, Finance Minister Sitharaman highlighted the initiative’s two-pronged focus on local production and export competitiveness. “Reducing duties on raw materials will bring down manufacturing costs, making products made in India competitive in global markets,” she added. This goes in line with the government’s larger “Make in India” campaign to turn the country into a hub for manufacturing.
The duty exemptions are a game-changer for the EV sector. India’s electric vehicle market is in the nascent stage, with domestic players Tata Motors and Mahindra & Mahindra, alongside foreign brands such as Hyundai and MG Motor leading the march. But the expense of battery components imported from abroad is a major obstacle to ramping up production and cutting car prices for consumers. This is a good move, as batteries make up to 40% of an EV’s cost, and this policy could help reduce the cost of electric cars, electric 2 wheelers, and commercial vehicles, speeding up India’s shift towards greener mobility.
Likewise, the mobile phone business has much to gain from this. India is now the world’s second-largest smartphone market, and with brands such as Samsung, Apple and Xiaomi already assembling devices in the country. But sourcing imported components has continued to keep production costs high. The government scrapped duties on 28 key items to deepen localization efforts, calling on manufacturers to source more parts domestically over time while keeping retail prices competitive.
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Tackling Global Trade Dynamics: A Strategic Approach
Significantly, this announcement comes now. The U.S.’s signaling a return to protectionist times under the Trump administration leaves India in danger of retaliatory tariffs on its exports. The country has a trade surplus (projected at $ 35 billion in FY 2023-24) with the U.S. At issue. By reducing import tariffs on EV and mobile phone components — industries that American companies like Tesla and Apple are interested in — it is making clear its willingness to establish a freer trade environment. It might facilitate smoother negotiations over tariffs and stave off a tariff war.
In addition, the policy supplements India’s drive to integrate with global EV and electronics supply chains. Tesla, for example, has long been interested in the Indian market but has been held back by high import duties for fully built vehicles. As this announcement specifically pertains to components and not completed products, it could lead to Tesla and other EV behemoths to set up battery or assembly plants in India by capitalizing on the benefits of making the parts there and then importing them duty-free. In a similar vein, Apple, which is already significantly ramping up its iPhone production in India via partners such as Foxconn, could stand to further extend its footprint as it stands to benefit from cheaper component sourcing.
Industry and Consumer Implications
Manufacturers will be immediately affected by this decision. For EV manufacturers, the PET bottle inlet can save the cost on battery components, which may help them cut the cost of production, allowing them to lower the price of vehicles or spend more on research and development of next-generation technology. For EV players like Ola Electric, which is looking to diversify its portfolio beyond scooters, and Ather Energy, a prominent electric two-wheeler company, this could mean faster growth and better margins. The policy, in addition, might also spur large new players to make their way to India’s EV space, making for a competitive environment and incentivising innovation.
The duty cuts in the mobile phone sector are likely to strengthen India’s status as a global manufacturing hub. With smartphone exports topping $11 billion in FY 2023-24, the nation is on course to become an important link in the electronics chain. Lifting import duties may further stimulate exports by making Indian-assembled phones more price-competitive, particularly in Southeast Asia, Africa, and Europe. For consumers, this will mean cheaper devices or better features for the same price as the savings are passed on by manufacturers.
Challenges Ahead
The policy has been broadly welcomed, but it is not without its challenges. The critics suggest that scrapping import duties could thwart efforts to build a fully self-reliant supply chain. India continues to remain reliant on imports for a considerable share of its EV battery materials—especially lithium and cobalt—from nations such as China, Japan, and South Korea. Until domestic raw material production and recycling infrastructure investment outpace these lofty goals, the country will continue to rely on foreign suppliers. There is an increasing realisation of this gap at the level of the government as well, with schemes such as Production Linked Incentive (PLI) for Advanced Chemistry Cells (ACC) being announced to promote local battery manufacturing. But these efforts are still nascent.
A second concern is potential customs revenue loss. Though the duty exemptions targeted specific components, any sizeable reduction in import tariffs will hurt the government’s financial resources, especially as it manages ambitious infrastructure spending with the economy recovering from the pandemic. Policymakers will have to get to grips with short-term revenue losses versus long-term industrial growth.
Looking Forward
India’s industrial evolution leaps with the removal of import duties on EV battery and mobile phone components. It signals a realistic navigation between domestic prerogatives and global trade-induced necessities, recasting the country as an attractive home for advanced manufacturing. As we move toward FY26, achieving the right policy outcome—and avoiding missteps—will be critical for this policy: Ensuring that cost benefits flow to manufacturers and consumers alike while also incentivizing new investment into domestic production capacity.
The future seems bright for India’s EV and mobile phone sectors. With supportive policies, a growing market, and a strategic focus on sustainability and technology, the country is set to take on an even larger role in shaping the future of mobility and connectivity. Whether giants such as Tesla will find their way to Indian shores until then or whether India will establish itself as a smartphone manufacturing powerhouse or not is yet to be seen, but all the groundwork has been done for a transformative shift now.
Source: Economic Times Auto
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