India Finalises New EV Policy, Offers Import Tax Cuts For Local Production

India has released detailed guidelines for its Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMPPCI), as more global EV companies show interest in the Indian market. 

First announced in March, the scheme sets out the investment rules and deadlines for international companies wanting to set up in India.

As per the guidelines, approved companies must invest at least Rs 4,150 crore to set up electric car manufacturing units in India. These factories must start operations within three years from the date they get approval from the Ministry of Heavy Industries (MHI). 

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Also, they must ensure at least 25% of the car parts and materials come from within India during this time.

DVA, or domestic value addition, means the part of a product’s value that is created within India during production. This helps boost local jobs and supports making electric vehicles in India. The DVA must increase to 50% within five years. Approved companies can also import fully built electric cars (CBUs) at a lower customs duty of 15%.

“The success of this policy will depend on efficient implementation and complementary support systems such as financing, charging infrastructure and skill development. Overall, it is a timely and strategic intervention that can accelerate India’s shift towards sustainable transportation," said Dhiraj Agrawal, CBO at Mufin Green Finance.

CBUs are electric cars made and assembled in another country and then brought to India for sale. Allowing these imports at a lower 15% tax for cars priced at $35,000 or more encourages global carmakers to invest in India’s growing EV market. 

However, this reduced tax rate will only apply for five years. These rules come as US-based Tesla is preparing to enter India, setting up its sales and operations teams and leasing space for showrooms in Mumbai and New Delhi.

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