Government Reveals New Electric Car Manufacturing Initiative

The Ministry of Heavy Industries has unveiled comprehensive guidelines for the “Scheme to Promote Manufacturing of Electric Passenger Cars in India” (SPMEPCI), initially announced on March 15, 2024. This initiative aims to attract both domestic and international investments in electric vehicle (EV) manufacturing, aligning with India’s environmental and industrial objectives. Key highlights of the scheme include reduced customs duties for imported EVs, stringent investment requirements, and localization targets designed to bolster domestic manufacturing.

Reduced Customs Duties for Imported EVs

Under the new guidelines, approved applicants can import fully built electric four-wheelers (CBUs) valued at a minimum of $35,000 with a significantly reduced customs duty of 15 percent. This concession will be available for five years from the date of approval. The move is expected to enhance the competitiveness of electric vehicles in the Indian market, making them more accessible to consumers. By lowering the financial barriers associated with importing EVs, the government aims to stimulate interest from global manufacturers and encourage them to establish a presence in India.

Investment and Localization Requirements

To qualify for the scheme, applicants must commit to a minimum investment of Rs 4,150 crore (approximately $500 million) in EV manufacturing infrastructure within three years. Additionally, companies are mandated to achieve a minimum of 25 percent domestic value addition (DVA) within three years and at least 50 percent DVA within five years. These localization targets are designed to ensure that a significant portion of the manufacturing process occurs within India, thereby fostering local industry and creating jobs. The assessment of these targets will follow the procedures outlined in the Production Linked Incentive (PLI) Auto Scheme.

Eligibility Criteria and Financial Safeguards

The eligibility criteria for the scheme are tailored to attract larger firms, requiring applicants to demonstrate global automotive manufacturing revenues exceeding Rs 10,000 crore and fixed assets worth at least Rs 3,000 crore based on their latest audited financial statements. This focus on larger entities may limit participation to established domestic and international companies. Furthermore, applicants must provide a bank guarantee equivalent to the greater of Rs 4,150 crore or the total customs duty exemption availed. This financial safeguard is intended to ensure compliance with the scheme’s requirements and protect government interests.

Application Process and Future Prospects

The application process for the SPMEPCI is set to commence soon, following the issuance of a Notice Inviting Applications (NIA). This window will remain open for a minimum of 120 days, with the possibility of extension until March 15, 2026. The scheme aligns with broader trade developments, including the India-UK Free Trade Agreement, which is gradually reducing import duties on premium EVs. As the initiative progresses, it is expected to generate employment opportunities, promote technology adoption, and enhance India’s position in the global EV manufacturing landscape. Industry stakeholders are closely monitoring the implementation of this policy, anticipating its impact on the future of electric vehicle production in India.

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