Image for representation only. Photo Credit: Hindu
the story So Far
After more than a year announced, the Ministry of Heavy Industries on Monday informed the scheme guidelines to promote the manufacture of electric passenger cars in India. The scheme reduces existing duties on import of vehicles for foreign manufacturers, which is currently subject to 70–100% to 15% to 15%, which is to meet the minimum requirements for investment and installation of facilities in the country. However, Union Minister HD Kumaraswamy has inspired concerns about the promise of the plan, indicating the reluctance of luxury EV manufacturer Tesla for construction in India.
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What does the policy propose?
In the center of the notified policy, there is a provision to reduce customs duty on the import of ready-to-ship which collects a fully electric four-wheelers up to 15%. This will apply to all vehicles worth $ 35,000 – cost, insurance and freight (CIF) – for a period of five years. However, it will be under the manufacturer investing at least ₹ 4,150 crore in the next three years. They will also be expected to build infrastructure and facilities, so that within three years 25% of the overall construction activity can be domestic (domestic value, or DVA) and 50% within five years. MHI specifies that a maximum of 8,000 vehicles in a year can be imported at a low duty rate, with no one with no limit. The maximum duty allowed to proceed under the scheme is ₹ 6,484 crore. Broadly, the overall plan aims to find a midway point, where a captive market gains, while also recognizing that import replacement will require a layered approach and a long timeline.
MHI calculated that an imported vehicle is priced at $ 35,000 () 29.75 lakhs), now at a rate of ₹ 20.8 lakh at a rate of 15% at a rate of 15% will be liable to pay the basic customs of ₹ 4.6 lakh at a rate of 15%. Therefore, at 5% with IGST at the resulting price, the total foregone duty amount is coming up to ₹ 36 lakhs with the final landing cost of up to ₹ 17.2 lakh. Now, in line with an initial investment of ₹ 4,150 crore and an foremord of .2 17.2 lakhs for each vehicle, the manufacturer will be allowed to import 24,155 units in total.
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But does it help in our overall ecosystem?
Assistant Research Professor at the Massachusetts Emhrist (US) University at the University of Massachusetts, Professor, toilet, argues that the domestic industrial policy combined with a vision for the future may be a step in the right direction. Although he holds the current policy, it will be good for India only when technology is shared with domestic vehicle manufacturers. In addition, he sees, “These days the country is extremely cautious about transferring the technology (to maintain its competitive advantage). In that light, India should not become a domestic center for the production of a vehicle components.”
Dinesh Ebol, a assistant faculty at the Transdiplinary Research Cluster on permanent study at JNU in Delhi, see that no foreign firm has ever helped to build an ecosystem of another country. He attributed China and South Korea’s ability to manufacture manufacturing setups to focus with skilling, research and development as well as intelligence innovation projects. “It inspires a technology transfer and companies to enter and invest in the ecosystem,” he said. Required to note, China was responsible for 70% of global manufacturing in 2024 as the lead manufacturer of EVS.
Other sets of concerns are related to the potentially increased focus on four-wheelers EVS, and their potential impact on India’s ambitions to achieve net zeros by 2070. According to data compiled by the Federation of Automobile Dealers Association (FADA), EVS took 7.8% of all vehicles sold in FY 2025. Two-wheelers (6.1%), passenger vehicles (2.6%) and commercial vehicles (0.9%). Significantly, the International Energy Association (IEA) identified India as the world’s largest market for electric three-wheelers in 2024. This was seen in sales by about 20% yoy, it was seen. Shri Chakraborty emphasizes that most Indians travel by public transport, and policies should also focus on the formation of the same. “As a bike and shuttle, the last mile connectivity means are also very important. It does not help a lot if someone has to walk a few kilometers to take advantage of public transport. It’s not how we can fight climate change”.
The final set of concerns is related to the input cost. S&P Global Mobility saw in an analysis published on March this year that high early costs, usually 20–30% higher than ice counterparts, “obstructs” the growth of the EV region in association with India’s dependence on imported components and batteries. Despite government efforts to promote localization through various policies, this rate was “not growing expected”.
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What about our industrial ambitions in EV space?
In addition to the effect on the ecosystem, concerns in the scope expand to the cost and competition. Roots In December 2023, Tesla had opposed Tesla’s proposal to reduce import duties about Tata Motors. It was argued, according to the report, reducing duties would be the climate of investment, which was around the expectations of the government in favor of unchanged people. The automaker further said that EV players of India need more government support in the initial development phase of the industry. According to IEA’s EV Outlook, domestic OEM calculated more than 80% of electric cars produced domesticly in 2024. In addition, it attributed to the availability of high import duties on EVS and locally created on EVS in 2024 in the country’s EV sales.
Thus, reducing duties worry about the potential impact on domestic industries (although not potentially not from China).
According to Mr. Abrol, this policy is around foreign-pilgrims and is an export-focus. He suggested that the policy should be oriented to research and development along with the construction and innovation of local ecosystems. Mr. Abrol has kept the lack of availability of skilled persons due to the missing contribution of the public sector. Shri Chakraborty further said, Western technologies by nature are generally more capital-intensive than labor-intensive economies. “Even though it is export-oriented, it will create jobs in an area,” he says, “however, the overall context needs to be considered how many jobs it is displacing, it is also considering that the EVS has less traditional part than a gasoline-managed vehicle in the EVS.”
Published – June 08, 2025 06:04 AM IST
