Govt may change EV manufacturing scheme to attract global players

The government is considering changes to its incentive scheme for electric passenger car manufacturing amid talks on a free trade agreement (FTA) with the European Union (EU), according to a report by The Economic Times.

 

The changes are being planned as the proposed India-EU FTA could reduce import duties on electric vehicles, making the current incentive structure less attractive for global electric vehicle (EV) makers to set up factories in India.

What are the existing concerns?

The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) was approved by the Centre in March 2024. Despite being in place for more than a year, the scheme has not received any applications so far.

 

According to the report, companies have cited multiple concerns, including uncertainty around the India–EU FTA and China’s restrictions on exports of rare earth magnets, which are critical for EV manufacturing.

 

A senior government official told The Economic Times that SPMEPCI would need changes after the India-EU FTA is finalised, as duty concessions alone may not be enough to convince companies to invest in India.

 

Automakers have told the government that if an FTA provides similar tariff benefits without mandatory investment commitments, SPMEPCI would not be needed, the report said. They also flagged challenges related to high investment thresholds and tight timelines under the scheme.

What is the SPMEPCI scheme?

SPMEPCI is designed to encourage global EV manufacturers to invest in India by allowing them to import electric cars at a lower customs duty for a limited period if they commit to setting up manufacturing facilities in the country.

What is the purpose of the scheme?

The scheme is aimed at positioning India as a major manufacturing hub for electric vehicles. By bringing in global EV players, the government hopes to boost domestic manufacturing, create jobs, and build advanced automotive technology capabilities in India.

 

It is also linked to India’s larger goals of promoting clean mobility, achieving Net Zero emissions by 2070, and strengthening the Make in India initiative.

How the scheme works

SPMEPCI allows approved applicants to import Completely Built Units (CBUs) of electric four-wheelers with a minimum import value of $35,000. These imports attract a concessional customs duty of 15 per cent for a period of five years from the date of approval.

 

In return, companies are required to commit to a minimum investment of ₹4,150 crore to set up manufacturing operations in India within a specific timeline.

What's next?

Many companies said they would take a final call on participation only after clarity emerges on the India-EU trade deal, The Economic Times reported. Sector experts believe that once the trade agreements are clear, the government may rework SPMEPCI to include more direct incentives beyond existing import duties.