Published on: June 9, 2025

HOW IS INDIA PLANNING TO LOCALISE EV MANUFACTURING?

HOW IS INDIA PLANNING TO LOCALISE EV MANUFACTURING?

CONTEXT:

  • India is aiming to become a major hub for Electric Vehicle (EV) manufacturing to reduce oil dependence, cut emissions, and boost green mobility.
  • The Ministry of Heavy Industries (MHI) notified the Scheme to Promote Manufacturing of Electric Passenger Cars, one year after its initial announcement.

CONCEPT: SCHEME HIGHLIGHTS

  • Customs Duty Slash: Allows import of fully built EVs at a reduced duty of 15% (from 70–100%) for 5 years.
  • Price Cap: Applicable to vehicles costing up to $35,000.
  • Investment Mandate: Manufacturer must invest ₹4,150 crore in India within 3 years.
  • Localisation Timeline:
    • 25% domestic value addition (DVA) in 3 years.
    • 50% DVA in 5 years.
  • Import Cap: Max of 8,000 EVs allowed at concessional rate per year.
  • Revenue Cap: Max duty forgone under the scheme is ₹6,484 crore.

CURRENT

  • Experts warn no foreign firm builds another country’s ecosystem unless tech transfer and skilling are prioritized.
  • India must avoid becoming just a component assembler; focus needed on R&D, innovation, and skilling (as done by China, South Korea).
  • China dominates global EV market (70% production share in 2024), thanks to long-term planning and local ecosystem development.

Market Data & Trends:

  • EV penetration (FY 2025): 7.8% of total vehicle sales.
    • 57% of 3-wheelers, 6.1% of 2-wheelers, 2.6% passenger EVs, 0.9% commercial EVs.
  • India is largest global market for electric 3-wheelers (IEA, 2024).

Industrial Concerns:

  • Tata Motors opposed Tesla’s import duty proposal, citing disruption of a policy environment designed to favour local manufacturers.
  • Domestic OEMs (Tata, Mahindra) contributed over 80% of India’s electric cars in 2024.
  • Chinese EV imports <15% due to earlier high import duties and availability of affordable Indian EVs.

WAY FORWARD:

  • Shift policy focus from foreign-capital to ecosystem-building.
  • Support public transport electrification and local R&D investment.
  • Design policies to balance foreign entry with domestic value creation.

MAINS QUESTIONS

  • Analyze the potential impact of the EV manufacturing scheme on India’s automotive industry, including the benefits and challenges.
  • Discuss the importance of developing a local ecosystem for EV manufacturing in India, including R&D, innovation, and skilling