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India’s New EV Policy Dangles Duty Cuts to Lure Global Investment 

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India’s electric mobility landscape is poised for a leap forward. In a bold policy shift, the Government of India has finalised guidelines that grant significant import duty concessions to global automakers, but with a clear catch: commit to local production. 

Under the new scheme, foreign carmakers can import a capped number of Completely Built Unit (CBU) electric vehicles at a reduced duty of 15%—down from the existing 70%—provided they invest at least ₹4,150 crore (approx. $486 million) in establishing manufacturing facilities in India. This is a strategic bid to attract global players, deepen domestic manufacturing capabilities, and support India’s green transition. 

Approved manufacturers can import up to 8,000 EVs annually under this duty structure for a five-year period. Any unused import allowance can be carried forward. However, the total customs duty benefit cannot exceed the lower of ₹6,484 crore or the actual investment made. 

But the incentives come with firm conditions. Companies must operationalise local manufacturing within three years of approval, and meet domestic value addition (DVA) thresholds—25% within three years, and 50% within five. Investments must go into tangible assets like machinery, R&D, and infrastructure, excluding land costs. Brownfield projects are permitted if clearly separated from existing operations. 

These measures are part of a broader push by the Ministry of Heavy Industries to position India not just as a market for EVs, but as a manufacturing and innovation hub. The scheme also includes stringent compliance checks, bank guarantees, and a ₹5 lakh non-refundable application fee. The application window will remain open for 120 days post-notification, with the possibility of extensions until March 15, 2026. 

Carmakers such as Mercedes-Benz, Skoda-Volkswagen, Hyundai, and Kia have already expressed interest in leveraging this scheme. Their willingness to commit to Indian manufacturing marks a potential turning point in the country’s EV narrative. 

Interestingly, Tesla—long viewed as a bellwether for EV adoption globally—is sitting this one out. Despite its moves to establish showrooms in India, the Elon Musk-led company has not shown interest in local manufacturing. According to Heavy Industries Minister Kumara Swamy, Tesla has only participated in early-stage consultations and skipped subsequent discussions. The company’s recent lease of a 4,000-square-foot showroom in Mumbai’s upscale Bandra-Kurla Complex hints at a retail-first, not manufacturing-driven, India strategy. 

Musk’s ambivalence may also be shaped by political crosswinds. As a close advisor and donor to U.S. President Donald Trump, who has publicly criticised the idea of Tesla manufacturing in India as “unfair,” Tesla’s current approach seems cautious, if not calculated. 

Nonetheless, for India, the opportunity is ripe. With supportive policies, a growing appetite for clean mobility, and the urgency of climate goals, this scheme could catalyse a new era in Indian automotive history. The government’s message is unmistakable: the future of EVs in India will be built in India—or not at all. 

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