Government weights Rs. Electric vehicle sales target at Rs 7,500 crore

India’s new electric car manufacturing plan aims to lure global players with lower tariffs

The Indian government is considering setting a sales target for the rupee. India’s Electric Vehicle Manufacturing Promotion Scheme has allocated Rs 7,500 crore as part of efforts to boost domestic production and attract global manufacturers. The initiative, led by the Ministry of Heavy Industry, is in its final stages and guidelines are expected to be finalized following inter-ministerial consultations.

Program overview

Launched in February 2024, the scheme aims to encourage major electric vehicle manufacturers to set up production facilities in India by providing temporary tariff concessions. Currently, companies importing complete vehicles face 100% import tax. However, the plan proposes a 15% reduction in tax rate over five years, subject to investment commitments of Rs. Domestic manufacturing facilities are worth Rs 4,150 crore.

Eligible companies also need to meet localization targets, achieving 25% domestic value added (DVA) in the third year and 50% DVA in the fifth year.

Formulate sales targets and investment conditions

Incorporating feedback from major domestic and international original equipment manufacturers (OEMs), the government is considering sales value milestones to enhance accountability. Companies participating in the scheme may need to reach Rs. Sales reached Rs 5,000 crore in the fourth year of operations and reached Rs 7,500 crore in the fifth year.

The scheme allows participants to import up to 8,000 electric vehicles per year at reduced tariff rates, with provisions for any import shortfall to be carried forward to subsequent years. Furthermore, 5% of the required Rs. An investment of Rs 4,150 crore is available for development of charging infrastructure.

To broaden participation, the scheme may allow brownfield investments. Companies that already produce cars in India can qualify simply by setting up new dedicated electric vehicle production lines. These participants will be subject to the same conditions as new entrants.

Tesla’s absence from stakeholder feedback is noteworthy

The Ministry of Heavy Industries has received feedback from almost all major global and domestic OEMs, including Nissan, BMW, Mercedes, VinFast, Hyundai, Kia, Toyota, Mahindra, Tata Motors and Maruti Suzuki. However, US electric car giant Tesla has yet to provide input or express formal interest in the plan.

Encourage global investment

The government hopes to attract global players such as Tesla and VinFast by offering significant incentives. The preferential tax rate will apply to fully assembled electric vehicles priced at $35,000 or more, targeting the premium segment and ensuring investments are aligned with India’s long-term localization goals.

Implementation timetable

After extensive consultations, the government plans to start inviting applications in mid-February 2025. The final guidelines are expected to reflect suggestions provided by stakeholders and be aligned with the objective of nurturing a strong EV ecosystem in India.

Balancing localization and market entry

The scheme has been compared with the Automotive Production-Linked Incentive (PLI) policy, which incentivizes domestic production through sales-linked targets. By introducing localization and sales benchmarks, the program aims to strike a balance between facilitating market entry for global players and boosting domestic manufacturing capabilities.

future challenges

While lower tariffs are an attractive proposition, strict localization and investment conditions may pose challenges for some companies. Industry analysts say the plan’s success will depend on how well it fits into the strategies of major global manufacturers and their ability to cope with India’s changing regulatory environment.

As the Ministry of Heavy Industries prepares to finalize the guidelines, stakeholders remain optimistic about the program’s potential to drive growth in India’s electric vehicle market while advancing the country’s green mobility agenda.

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