Hitting a speed bump: Carmakers raise concerns over EV scheme rules

Trade talks, high investment, and localisation targets deter participation

A pending decision on the India–European Union (EU) free-trade agreement (FTA), steep investment and sales targets, and strict localisation norms amid import restrictions on rare-earth magnets are among the reasons major carmakers have shown little interest in the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), Business Standard has learnt.

 

These concerns were raised with the Ministry of Heavy Industries (MHI) by automakers during a meeting on October 29. The ministry had called the meeting to assess companies’ willingness to participate in the scheme and to invite suggestions for its improvement.

 

Škoda Auto Volkswagen India, Renault India, Honda Car India, Hyundai Motor India, and Mercedes-Benz India were among those that shared detailed feedback. Škoda Auto Volkswagen India, a group company, oversees multiple passenger vehicle brands in India — Škoda, Volkswagen, Audi, Porsche, Lamborghini, and Bentley. Both MHI and the automakers declined to comment on Business Standard’s specific queries.

 

The MHI issued detailed guidelines for the SPMEPCI on June 2 and opened an online portal on June 24 for a 120-day application period. However, no company applied during that window.

 

At the October 29 meeting, Škoda Auto Volkswagen and Renault expressed interest but said their final decision hinged on the outcome of the India–EU FTA talks. The FTA could lower import duties on European cars, reducing the incentive to manufacture electric vehicles (EVs) locally.

 

Škoda Auto Volkswagen also highlighted that China’s export restrictions on rare-earth magnets could make it difficult to meet the scheme’s domestic value addition (DVA) targets, according to sources.

 

While China has continued to allow exports of fully built traction motors to India since April, it has tightened controls on the export of rare-earth magnets — a key input for these motors. As a result, some automakers may have to import complete traction motors instead, increasing the overall import content in electric cars (e-cars) assembled in India.

 

SPMEPCI was designed to attract investment, promote local EV manufacturing, and cut import dependence. The scheme mandates a minimum investment of ₹4,150 crore within three years, with companies required to achieve 25 per cent DVA in three years and 50 per cent in five. Approved firms can import up to 8,000 e-cars annually at a concessional 15 per cent duty for five years.

 

Mercedes-Benz, Renault, and Hyundai told MHI that the ₹4,150 crore investment threshold over three years was too high. They suggested either lowering the requirement or extending the timeline. Hyundai also proposed a lower threshold for companies already operating in India, citing their existing investments, sources said.

 

Mercedes-Benz India said that the minimum sales targets prescribed were unrealistic and suggested that investments made by vendors be counted under the scheme. Honda Car India said fresh investments were not feasible as it has sufficient manufacturing capacity at its existing facilities.

 

The ministry will now review these inputs before deciding whether to reopen the application window for the scheme. 

 

 

Automakers want softer terms, policy clarity

 

·         Škoda, Renault await India-EU FTA clarity before EV move

 

·         Škoda flags localisation challenge amid import curbs

 

·         Mercedes, Renault, Hyundai call investment bar too steep

 

·         Hyundai seeks lower cap for existing India players

 

·         Honda says new EV investment unfeasible amid sufficient plant capacity