India May Revise EV Manufacturing Policy Amid US Trade Talks

India is ready to modify its recently announced electric vehicle (EV) manufacturing policy in response to changes in import tariffs that might emerge in the wake of the ongoing India-US trade negotiations, says a report by ET Auto. The Scheme for Promotion of Manufacturing of Electric Passenger Cars in India (SPMEPCI), unveiled in March 2024, is yet to be implemented as officials await final approvals.

"The guidelines could be launched in a few weeks," a senior official was quoted as saying by the report, noting that final approvals from several ministries remain pending. 

Once published, these guidelines will establish the operational framework of the scheme and open the application process for EV manufacturers. Officials have indicated the incentive structure could be revised once the India-US bilateral trade agreement is finalised.

Importance Of Domestic Production

The SPMEPCI originally required companies to invest a minimum of Rs 4,150 crore in EV manufacturing operations. In exchange, qualified manufacturers would benefit from reduced 15 per cent import duties on premium electric vehicles. The policy also mandates participants to achieve at least 25 per cent domestic value addition within three years, increasing to 50 per cent after five years.

Tesla Concerns And US Pressure Complicate Landscape

The policy's effectiveness has been called into question as discussions about lowering India's automotive import duties have gained momentum following pressure from US President Donald Trump. Earlier this week, representatives from Elon Musk-owned Tesla specifically identified India's high import tariffs as a significant barrier to entering the Indian market.

These comments come amid bilateral trade agreement negotiations where import duties have emerged as a contentious issue. Government sources confirm India will adjust the SPMEPCI if car import duties are reduced, potentially enhancing incentives for local manufacturing to maintain its appeal.

Import Tariff Structure

India currently imposes import duties of up to 100 per cent on automobiles to protect its domestic manufacturing sector, with various tariff levels also applying to automotive components. President Trump initially announced, but subsequently paused, reciprocal tariffs intended to boost American manufacturing. He has consistently criticized India's high import duties on automobiles and other products, arguing they create an uncompetitive environment for US exports.