In March 2024, the Government of India introduced a policy allowing reduced import duties on electric vehicles (EV’s) priced above USD 35,000 (approximately ₹30 lakh). Under the scheme, eligible companies can import up to 8,000 units annually at a reduced customs duty of 15%, provided they commit to manufacturing in India within three years. The policy aims to attract foreign investment in the EV sector while balancing domestic manufacturing goals.
Conditions
To access the duty concession, automakers must invest at least ₹4,150 crore (around USD 500 million) in local manufacturing and meet localization milestones – 25% domestic value addition by year three, and 50% by year five. These conditions are designed to ensure that reduced duties benefit companies planning long-term operations in India. However, the policy also limits the number of imported units to prevent market saturation without domestic production.
Tesla
Tesla has been exploring entry into India for several years. While the reduced duty could make some of its models more price accessible, the company has not committed to local manufacturing. Without meeting the investment and localization conditions, Tesla vehicles are subject to the standard 100–110% import duty. As a result, initial offerings like the Model Y are carrying a higher price point, limiting their competitiveness in India’s cost-sensitive market.
VinFast
Vietnamese automaker VinFast has announced plans to build a manufacturing facility in Tamil Nadu. If the company meets the government’s investment and localization criteria, it could take advantage of the reduced import duty during the setup phase. This would allow it to bring limited volumes of electric vehicles to India while the plant becomes operational. The long-term benefit will depend on how quickly it scales local production.
Other Manufacturers
Other global automakers, including Mercedes-Benz, Volkswagen Group, and Hyundai, have reportedly shown interest in the scheme. Domestic manufacturers have expressed concerns about the potential for uneven competition if imported models gain early market access without sufficient local manufacturing support.
Conclusion
The import duty cut aims to balance the promotion of global EV brands with India’s goal of becoming a manufacturing hub. While it opens doors for new entrants like VinFast, it does not guarantee automatic benefit for brands unwilling to invest locally. The effectiveness of the policy will depend on how companies respond and how enforcement ensures manufacturing commitments are met.
