Business APAC
June 10, 2025
The Indian government has rolled the dice. In a bold, high-stakes play to become a global force in electric vehicles, New Delhi is dangling a tempting offer to the world’s biggest automakers: deep tax cuts on imported EVs. The catch? A non-negotiable, time-bound demand to build, not just assemble, on Indian soil.
The policy, officially unveiled in March 2024, has sent ripples through the automotive world. It’s a calculated pivot designed to attract giants like Tesla and their global rivals, but it also presents a stark challenge to homegrown champions who have invested heavily in building India’s EV manufacturing ecosystem.
At its heart, the new framework is a classic carrot-and-stick approach. For a minimum investment of $500 million (₹4,150 crore), foreign companies can import up to 8,000 electric cars a year at a dramatically reduced 15% import duty, a far cry from the prohibitive 70-100% tariffs that have long protected the domestic market.
But the real goal lies in the fine print. The government has mandated that these companies must achieve 25% domestic value addition (DVA) within three years, rising to a substantial 50% by their fifth year. This isn’t just about factories; it’s a determined push to foster a deep-rooted and resilient India’s EV manufacturing ecosystem.
A Contentious Shift in Strategy
This move marks a sharp departure from the previous FAME schemes, which primarily focused on stimulating demand through consumer subsidies. While those policies helped put electric two-wheelers on the road, they did little to build a robust India’s EV manufacturing ecosystem for passenger cars.
The new policy, by contrast, is all about the supply side. Industry bodies have been quick to weigh in, reflecting the complex feelings it has generated. The Society of Indian Automobile Manufacturers (SIAM) acknowledged it would “accelerate the transition to electric mobility,” especially in the premium segment, a move seen as beneficial to the entire supply chain.
Similarly, the parts industry sees a massive opportunity. Shradha Suri Marwah, President of the Automotive Component Manufacturers Association (ACMA), called the policy a “huge fillip to the localisation of advanced automotive technologies.” For component makers, the mandate to use local parts is a potential windfall that could justify massive new investments and strengthen India’s EV manufacturing ecosystem.
An Uneasy Welcome
But not everyone is celebrating. For domestic players like Tata Motors and Mahindra & Mahindra, who have single-handedly built the foundations of India’s EV manufacturing ecosystem from the ground up, the policy feels like a potential undercutting of their efforts. Having already poured billions into R&D and manufacturing without such concessions, the primary concern revolves around a level playing field. While not publicly decrying the policy, the sentiment from these camps has been one of wary observation.
This creates a tense dynamic: the promise of fresh foreign investment and technology transfer on one hand, and the risk of disadvantaging the very companies that heeded the government’s earlier “Make in India” call on the other.
Ultimately, this policy is more than an industrial strategy; it’s a defining test. Can India successfully leverage global capital to bolster India’s EV manufacturing ecosystem without sidelining its homegrown champions? The world’s automakers are watching, and India’s electric future hangs in the balance.
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