The Ministry of Heavy Industries has released comprehensive guidelines for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMPCI), providing a clear framework for global automakers to benefit from reduced import duties in exchange for setting up local manufacturing operations.
Originally announced in March 2024, the scheme focuses specifically on electric passenger vehicles, marking a strategic shift from broader automotive incentives to targeted EV-centric policies. To qualify, companies must commit to a minimum investment of ₹4,150 crore (approximately USD 500 million) within three years of approval. This investment must be directed toward building and operating manufacturing facilities for electric passenger cars in India.
The policy aims to attract established global automotive players rather than startups, with eligibility criteria emphasizing strong financial capability and an existing presence in the global automotive sector.
Import Duty Relief Structure
A key feature of the scheme is the reduced customs duty on imported electric vehicles. Approved manufacturers will be allowed to import fully built EVs priced at USD 35,000 or above at a concessional duty rate of 15%, significantly lower than the prevailing rates.
The duty relief is subject to the following conditions:
- A maximum of 8,000 vehicles can be imported annually under the reduced rate
- The benefit is available for a five-year period
- Total duty savings are capped at ₹6,484 crore or the actual investment amount—whichever is lower
- Unused annual quotas can be carried forward to subsequent years
Localization Requirements
Companies participating in the scheme are required to progressively enhance local value addition in their manufacturing operations:
- Achieve 25% domestic value addition within three years
- Reach 50% domestic value addition within five years
These targets aim to ensure that the import duty benefits translate into genuine technology transfer and local supply chain development, rather than serving as permanent subsidies for imported vehicles.
To ensure companies follow through on their commitments, the scheme requires a bank guarantee equal to either the total duty savings or Rs. 4,150 crore, whichever is higher. The guarantee must remain valid throughout the scheme period and will be forfeited if companies fail to meet investment or localization targets.
Eligible Investment Components
The guidelines outline the types of expenditures that can be counted toward the required investment commitment:
- Manufacturing equipment and machinery
- Research and development facilities
- Charging infrastructure, capped at 5% of the total investment
- Land and buildings, limited to 10% of the investment, provided they are part of the core manufacturing facility
The ministry plans to launch an online portal for submissions and will use existing procedures from the PLI automotive scheme to evaluate domestic value addition claims.
Certification of local content will be handled by government-approved testing agencies, following established protocols from other automotive incentive programs.
Market Context
The policy builds on India’s existing automotive incentive framework but narrows the focus specifically to electric passenger cars. Unlike the broader PLI scheme for automotive components, SPMPCI targets finished vehicle manufacturing by companies with substantial global operations.
India’s electric passenger car market remains small compared to two-wheelers and three-wheelers, which have seen faster adoption due to lower costs and simpler charging requirements. The new scheme appears designed to accelerate four-wheeler adoption by reducing the cost barrier for global manufacturers to test the Indian market while building local capacity.
Implementation Timeline
The scheme sets clear deadlines for participants:
- Within 3 years: Manufacturing operations must begin
- Within 3 years: Achieve 25% domestic value addition
- Within 5 years: Achieve 50% domestic value addition
Policy Implications
This scheme highlights the Indian government’s strategy of offering temporary import duty concessions to drive long-term manufacturing investments. Instead of permanent tariff cuts, the policy provides time-bound incentives linked to clear performance milestones.
For global automakers, it presents an opportunity to gauge consumer interest in premium electric vehicles while laying the groundwork for future local production. The high investment threshold signals the government’s intent to attract serious, long-term players rather than short-term entrants.
By focusing exclusively on electric passenger cars, the initiative supports India’s climate goals. However, its real impact will depend on how many global manufacturers view the market potential as worth the required investment.
Applications are expected to open soon, once the official online portal is launched.
