India will begin accepting applications this month for a new EV policy announced in March 2025. The policy offers a reduced 15% import duty on electric cars priced at US$35,000 or more.

In return, automakers must invest at least 41.5 billion rupees (US$500 million) to build a local manufacturing facility within three years.

Companies can import up to 8,000 EVs annually at the lower duty rate. Applications will be accepted until March 15, 2026.

The policy aims to attract global EV makers like Tesla, which has criticized India’s high import duties.

With EV demand slowing globally, India sees an opportunity to boost its market. However, this move may increase competition for local automakers.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ India’s EV policy reverses historical protectionism to jumpstart manufacturing

India’s new policy represents a dramatic shift from its traditionally high import barriers, where duties previously reached up to 100% on imported electric vehicles 1.

The government’s approach of offering conditional duty reductions to 15% mirrors successful strategies used in other emerging markets, where targeted incentives have proven effective at attracting foreign manufacturers.

This policy change comes as global government EV incentives have declined from 20% of total EV spending in 2017 to just 7% in 2024, showing India’s move against the global trend of reducing subsidies 2.

The strategy of requiring substantial investment ($500 million) in exchange for market access reflects a careful balance between attracting global players while ensuring they contribute meaningfully to the local economy rather than simply importing vehicles.

By allowing only 8,000 reduced-duty vehicles annually per manufacturer, India is creating a limited but valuable entry point that encourages companies to quickly transition to local production to scale beyond this cap.

2️⃣ Local champions face unprecedented competitive pressure

Tata Motors, which currently commands over 70% of India’s EV market, will face its first serious competitive challenge from global manufacturers under this policy 3.

The EV landscape in India has been developing in relative isolation, with local sales reaching 455,733 units in FY2022 but primarily dominated by domestic players protected by high import barriers 4.