India launches new electric vehicle policy, lowers import duties from 110% to 15%

In a fresh attempt to promote the import of electric vehicles in India, the Ministry of Heavy Industries has decided to reduce its customs duty, allowing the import of EVs at a rate of just 15 per cent under its new policy, ‘Scheme to Promote Manufacturing of Electric Passenger Cars in India’ (SPMEPCI).

In general, the customs duty stands at 110 per cent, acting as an impediment to India’s EV import. 

However, the Original Equipment manufacturers (OEMs) are required to show long-term commitment in India’s EV sector by investing Rs 4,150 crore (approximately $500 million) within a period of 3 years. Manufacturers would also be allowed to establish assembly operations in already-existing manufacturing facilities; however, the initial investment level will not include previous investments or land/building expenses. For five years, the tariff reductions will be in effect.

The second requirement is that participating automakers must record progressive yearly turnovers: Rs 2,500 crore by the second year, Rs 5,000 crore by the fourth year, and Rs 7,500 crore by the fifth year. In addition, producers are required to establish local production facilities by the end of the third year and attain a local value addition of 25 per cent, which ought to be raised to 50 per cent by the end of the fifth year.

The reduced import tax will only be applied to 8,000 premium EVs (those costing more than USD 35,000) every year, and after that, the existing 110 per cent charge will be applied. The total amount of savings from the tariff reductions is limited to Rs 6,484 crore or the actual investment, whichever is less. Additionally, any unused annual quotas may be carried forward.

Furthermore, the government has stated that expenses such as manufacturing machinery and equipment, research and development facilities, charging infrastructure, land, and buildings (up to 5% of the total investment if they are a part of the main manufacturing facility) is included in while counting the initial required investment under the programme. The opening of an online platform for SPMEPCI applications and compliance with the rules is essential, and automakers are expected to start receiving approval letters in August 2025.