India tweaks guidelines for Made-in-India electric cars, allows importing vehicles at lower tariff

India has rolled out a revised incentive program aimed at attracting foreign automakers to set up electric vehicle (EV) manufacturing operations within the country, offering significantly lower import duties in return for firm investment commitments.

The Ministry of Heavy Industries on Monday (June 2) notified detailed guidelines for the scheme, which allows global manufacturers to import a limited number of fully built EVs valued at $35,000 or more at a concessional duty rate of 15 per cent. This compares with the existing duty structure of 70 to 110 per cent.

In exchange, companies must commit to investing at least Rs 4,150 crore, or approximately $486 million, and begin producing electric passenger vehicles locally within three years of receiving approval.

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Heavy Industries Minister H.D. Kumaraswamy called the policy a strategic move to make India a manufacturing base for EVs, stating that the plan provides a strong policy framework to attract both foreign and domestic manufacturers seeking long-term presence in the growing Indian EV market, according to a report by Moneycontrol.

Investment rules and revenue requirements

Approved companies will be permitted to import up to 8,000 vehicles annually at the reduced tariff. Any unused quota may be carried over to subsequent years. The total benefit derived from the lower duties has been capped at Rs 6,484 crore or the actual investment made, whichever is lower.

To qualify, applicants must belong to corporate groups with at least Rs 10,000 crore in annual revenue from automotive manufacturing and a minimum of Rs 3,000 crore in fixed assets. A non-refundable application fee of Rs 5 lakh will apply. The ministry said it will accept applications for at least 120 days starting this month, with a final deadline of March 15, 2026, although new windows may be opened at the government’s discretion.

Companies must meet revenue targets of Rs 5,000 crore in the fourth year after approval and Rs 7,500 crore in the fifth. Failure to meet these benchmarks could result in penalties of up to 3 percent of the shortfall in revenue.

Domestic value addition and industry response

The program includes mandatory local content targets. Manufacturers will need to achieve 25 percent domestic value addition (DVA) within three years and raise it to 50 per cent by the fifth year.
The government believes these thresholds will support its “Make in India” and “Aatmanirbhar Bharat” initiatives while allowing firms to introduce advanced EV technologies.

“Through calibrated customs duty concessions and clearly defined DVA milestones, the scheme aims to balance technology infusion with local capability development,” said Kumaraswamy.

The government had originally announced the plan in March 2024 but held it back for revisions to attract larger players and impose more stringent eligibility norms.

Automakers such as Mercedes-Benz, Hyundai, Kia, Skoda and Volkswagen have expressed interest in entering the Indian market under the revised terms. Kumaraswamy added that Tesla, which has been in discussions with Indian officials for years, is not expected to manufacture cars in the country for now, although it is preparing to start vehicle sales.

The new guidelines may ramp up competition for Indian automakers that currently dominate the local EV space. Tata Motors and Mahindra & Mahindra, which together lead the segment, had previously lobbied against a broad cut in import duties to protect their early investments.

India’s EV penetration remains modest. Just 2.5 per cent of 4.3 million passenger vehicles sold in 2024 were electric, but the government has set a goal of reaching 30 per cent by 2030.