India's Strategy for Electric Vehicle Manufacturing: A Comprehensive Overview

Introduction

To strengthen domestic electric vehicle (EV) manufacturing, the Ministry of Heavy Industries (MHI) notified the Scheme to Promote Manufacturing of Electric Passenger Cars in India in 2024. This policy aims to transform India into a significant EV manufacturing hub while reducing dependence on imported fully built units.

Provisions

• Reduced Customs Duty:
  • Customs duty on completely built electric four-wheelers has been reduced from 70-100% to 15% for five years.
  • The reduced duty applies to vehicles valued at $35,000 or above.
• Investment Commitment: Manufacturers must invest at least ₹4,150 crore within three years to qualify for the scheme.
• Local Manufacturing Targets:
  • 25% of overall manufacturing must be completed in India within three years.
  • This rises to 50% within five years.
• Import Cap:
  • A maximum of 8,000 vehicles can be imported annually at the reduced duty.
  • The total foregone customs duty under the scheme is capped at ₹6,484 crore.

Examples of Implementation

• Domestic Players: Tata Motors and Mahindra accounted for over 80% of EVs produced domestically in 2024, as reported by the International Energy Agency (IEA).
• Tesla’s Entry Concerns: Tata Motors opposed Tesla’s plan to reduce import duties in December 2023, stressing the need for nurturing local capacity instead of relying heavily on imports.

Significance

• Strengthens Local Ecosystem: The policy is designed to attract investment in local manufacturing, fostering job creation and technological growth.
• Affordable Electric Cars: Encourages the production of locally made, low-cost electric vehicles, expanding consumer access.
• Reduces Import Reliance: Supports India’s vision of becoming a self-reliant EV hub, reducing the trade imbalance associated with fully built imports.

Challenges

• Dependence on Foreign Investment: Concerns exist that the policy might overly rely on foreign investors, sidelining domestic players in initial phases.
• Technology Transfer Gaps: Achieving real knowledge and technology transfer to India’s workforce and companies will take time.
• Global Competition: Competing with established EV giants such as China and South Korea, which already dominate global EV manufacturing, will require sustained policy support.