India Opens Flagship EV Policy To Global Carmakers But Tesla Not Coming

The central government has notified final guidelines of its flagship EV policy to attract global carmakers to make in India for the world, but Tesla Inc. isn't likely to be one of them.

“Mercedes-Benz, Volkswagen-Skoda and Hyundai Motor Co. have already shown interest,” Heavy Industries Minister HD Kumaraswamy said during a press conference on Monday. “Tesla, we are not actually expecting (interest) from them… They are not interested in manufacturing in India,” the minister said. “As from what we know, Tesla plans to open showrooms in India to sell cars.”

Skoda Auto Volkswagen India Pvt. Ltd. said it was closely monitoring developments related to the EV policy in India and was “thoroughly assessing their implications”. “Based on this, we will define the appropriate next steps in line with our long-term strategy,” a company spokesperson said in a statement.

Mercedes-Benz refused to comment on the matter. An email sent to Hyundai Motor India Ltd. remained unanswered.

Announced on 15 March 2024, the ‘Scheme to Promote Manufacturing of Electric Cars in India' offers to slash import duty to 15% on electric cars priced at least $35,000 if their maker invests at least $500 million to set up a local plant within three years. Up to 8,000 cars can be imported annually at this reduced rate for five years.

India EV Policy: Key Guidelines

• An approved applicant will be allowed to import completely built-up units of electric cars priced at $35,000 and above at a reduced import duty of 15% for a period of five years.

• A total of 8,000 electric cars can be imported annually via this route. Any unsold inventory can be carried over to the next year.

• The amount of import duty waived will be limited to Rs 6,484 crore or minimum investment of Rs 4,150 crore ($500 million)

• The applicant has to invest $500 million to set up a local plant within three years. An electric car manufactured here has to achieve 25% localisation in three years and 50% in five years.

• If the applicant already has manufacturing operations in India, it has to invest a minimum of $500 million to build a new EV assembly line within three years.

• The cost incurred towards land acquisition will not be considered as investment. Any construction on this land will be considered as initial investment, provided it doesn't exceed 10% of the total commitment.

• Expenditure incurred on setting up charging infrastructure will be considered as initial investment, provided it doesn't exceed 5% of the total commitment.

• The applicant's investment to set up shop in India has to be backed by a bank guarantee equivalent to the import duty waived or Rs 4,150 crore ($500 million), whichever is higher.

• The applicant needs to have a global annual revenue of Rs 10,000 crore with capex of at least Rs 3,000 crore.

A notice inviting applications will be issued shortly. The window will be open until March 15, 2026.

To be sure, electric cars are still a nascent segment in the world's third largest car market. In the fiscal year ended March 31, 2025, electric car sales rose 17.63% year-on-year to 1,07,645 units. This was the first time the segment crossed the one-lakh mark, in a market that ships 40 lakh cars annually. 

Tata Motors Ltd., JSW MG Motor India Pvt. Ltd. and Mahindra & Mahindra Ltd. are the key players in the EV category. Overall market leader, Maruti Suzuki India Ltd., has yet to launch an electric car.