India’s EV Scheme Aims to Boost Local Manufacturing

India’s EV Scheme Aims to Boost Local Manufacturing

Why in News ?

The Ministry of Heavy Industries notified the long-awaited policy to promote electric passenger car manufacturing in India. It allows lower import duties for EVs if firms invest locally and meet localisation targets to strengthen India’s EV ecosystem.

Policy Highlights and Investment Mandates

• The scheme cuts customs duty on fully built imported electric four-wheelers from 70-100% to 15%, valid for 5 years.
• Only EVs priced at $35,000 or more are eligible.
• Firms must invest ₹4,150 crore within 3 years and achieve 25% local manufacturing by year 3 and 50% by year 5.
• Imports at the reduced rate are capped at 8,000 vehicles/year.
• The total duty foregone under the scheme is capped at ₹6,484 crore.

Concerns on Ecosystem, Technology, and Priorities

• Experts argue benefits will materialise only with technology transfer to local firms, which foreign companies are often reluctant to share.
• India must avoid becoming a low-value component assembly hub, like in past global trade setups.
• Critics urge emphasis on R&D, skilling, and innovation, akin to models in China and South Korea.
• India’s EV market in FY25 was led by 3-wheelers (57%), not 4-wheelers, which accounted for only 2.6% of sales.
• Public transport EVs need policy support due to their mass usage.

Domestic Industry’s Concerns and Way Forward

• Tata Motors and other local OEMs fear reduced import duties could disrupt domestic investment incentives.
• In 2024, Tata and Mahindra made up 80% of locally produced electric cars.
• The IEA credited high import duties for keeping Chinese EVs below 15% market share.
• Critics want policies rooted in local ecosystems, not just foreign capital dependency.
• The government is considering an umbrella GST rate for EVs to further boost adoption.