Why in News?

The Ministry of Heavy Industries issued detailed guidelines under the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), first notified on March 15, 2024.

The scheme offers reduced import duties to global electric vehicle (EV) manufacturers in return for significant investments in domestic manufacturing.

The Union Heavy Industries Minister also noted that the global EV giant Tesla is not interested in manufacturing cars in India but keen on establishing showrooms in the country. Earlier, the U.S. President Donald Trump has said that if Tesla were to build a factory in India to circumvent that country's tariffs, it would be "unfair" to the U.S. 

What’s in Today’s Article?

• Key Highlights of the Scheme
• Safeguards and Compliance Mechanisms
• Eligibility Criteria for Applicants
• Application Process
• Schemes for Advancing India’s EV Ecosystem
• Conclusion

Key Highlights of the Scheme:

• Reduced import duties on electric vehicles:
  • Companies can import up to 8,000 electric four-wheeler (e-4W) units annually at a reduced customs duty of 15%, compared to the existing 70–100%.
  • The benefit is applicable for 5 years from the date of application approval.
  • Applicable only on CBUs (Completely Built Units) with a minimum CIF (Cost, insurance, and freight)value of $35,000.
• Investment mandate:
  • Approved applicants would be required to make minimum investment of Rs. 4,150 crore in line with the provisions of the scheme.
  • Manufacturing operations must commence within 3 years of application approval.
  • Eligible investment includes:
    • New plant, machinery, equipment, and associated utilities
    • Engineering Research and Development (ER&D)
    • New buildings (up to 10% of committed investment)
    • Charging infrastructure (up to 5% of committed investment)
  • Land costs are excluded from eligible expenditure.
• Domestic value addition (DVA) requirements:
  • Minimum 25% DVA within 3 years.
  • Minimum 50% DVA within 5 years from the approval date.

Safeguards and Compliance Mechanisms:

• The Applicant’s commitment to set up manufacturing facility/ies, shall be backed by a Bank Guarantee from a scheduled commercial bank in India equivalent to -
  • The total duty to be forgone (capped at ₹6,484 crore per applicant) or
  • Rs 4,150 crore, whichever is higher.
• The Bank Guarantee should be valid at all times during the tenure of the Scheme.

Eligibility Criteria for Applicants:

• To qualify and receive benefits under the scheme, an applicant is required to have a global group revenue from automotive manufacturing of a minimum ₹10,000 crore.
• Moreover, the global investment of a company or its group companies in fixed assets must be at least ₹3,000 crore.

Application Process:

• Application window: At least 120 days, starting soon (June 2025).
• The Ministry of Heavy Industries shall have the right to open the application window, as and when required till March 15, 2026.
• A non-refundable application fee of ₹5,00,000 will be payable by the applicant while filing the application form.

Schemes for Advancing India’s EV Ecosystem:

• PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme:
  • Notified on 29th September, 2024, to incentivise sale of e-2W, e-3W, e-Trucks, e-Ambulances, and e-buses.
  • The scheme also supports development of charging infrastructure and upgradation of vehicle testing
• Production Linked Incentive Scheme for Automobile and Auto Component Industry (PLI-Auto): Approved on 15th September, 2021, for enhancing India's manufacturing capabilities for Advanced Automotive Technology (AAT) products.
• PLI Scheme for Manufacturing Advanced Chemistry Cells (ACC): Approved on 12th May, 2021, the scheme envisages to establish a cumulative ACC battery manufacturing capacity of 50 GWh.
• FAME-II: It was introduced with the objective of domestic manufacturing of electric vehicles, its assemblies/ sub-assemblies and parts/sub-parts thereby increasing the domestic value addition.
• PM e-Bus Sewa-Payment Security Mechanism (PSM) Scheme: The scheme aims to support deployment of more than 38,000 electric buses.
• SPMEPCI: This scheme promotes the manufacturing of electric cars in India.

Conclusion:

This scheme is a significant policy step under India’s green mobility and manufacturing push, aligning with net-zero emission goals, job creation, and boosting local value chains.

It seeks to make India an attractive destination for global EV manufacturers while ensuring significant domestic economic benefits.