India Unveils Incentive-Led EV Manufacturing Guidelines To Attract Global Carmakers

In a major policy push to establish India as a global electric vehicle (EV) manufacturing hub, the Ministry of Heavy Industries has released detailed guidelines for its new Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMPCI). The initiative is designed to lure international carmakers with investment-linked import duty concessions while enforcing strong localisation requirements.

The scheme offers a substantial carrot to foreign manufacturers: a significantly reduced 15% customs duty on fully built electric passenger vehicles priced above $35,000 — a sharp drop from the standard 70%–100% — for a five-year period. However, this incentive comes with clear strings attached. To qualify, automakers must commit to investing at least Rs 4,150 crore (approximately $500 million) within three years to set up manufacturing operations in India.

The annual import quota under the scheme is capped at 8,000 vehicles, and the total customs duty savings that a company can claim is limited to the lower of Rs 6,484 crore or its total committed investment. Any unused import allowances can be carried over to subsequent years, offering some flexibility in implementation.

Beyond investment, the scheme imposes strict domestic value addition (DVA) norms. Companies are required to achieve 25% localisation within three years and scale it up to 50% by the end of the fifth year. The guidelines also mandate a bank guarantee covering the greater of the duty savings or Rs 4,150 crore to ensure compliance with investment and localisation targets.

Only specific categories of capital expenditure will count toward the investment threshold. These include manufacturing machinery, R&D infrastructure, and charging stations, though the latter is capped at 5% of the total investment. Spending on land and buildings is restricted to a 10% inclusion, and only if it pertains directly to the primary manufacturing facility.

An online application portal will soon be launched, with the Ministry planning to adopt evaluation processes used in the Production Linked Incentive (PLI) scheme to verify companies’ DVA claims.

While India already offers incentives under the broader Production Linked Incentive (PLI) scheme for the auto sector, the SPMPCI represents a more targeted effort aimed at electric passenger vehicles. The move is widely seen as part of the government’s broader strategy to boost clean mobility, reduce dependence on imports, and strengthen the country’s industrial base.

Applications are expected to open soon, with strict timelines in place for production commencement and localisation benchmarks. The government will closely monitor progress to ensure participants meet the stipulated goals. The SPMPCI signals a clear shift from temporary tariff relief to structured, high-investment industrial policy — a move aimed at anchoring India firmly in the global EV value chain.