Centre Notifies Guidelines to Boost Electric Car Production

Why in the News?
 

1. On June 2, 2025, the Indian government announced detailed rules for a new scheme to boost electric car production in India.
2. This scheme is known as “Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI)”
3. This scheme aims to bring global electric car companies to India and support local manufacturing of electric vehicles (EVs).

What is the Scheme?

1. Goals of the Scheme:
   1. To bring global companies to India.
   2. To create more jobs.
   3. To get new technology.
   4. To support the “Make in India” campaign.
   5. To help India reduce carbon emissions and reach its net-zero goal by 2070.
   6. This scheme wants to make India a world leader in electric car manufacturing.
2. Reduced Import Duty:
   1. Approved foreign companies can bring fully built electric cars (CBUs) into India at a lower tax.
   2. These cars must cost at least $35,000 (around ₹29 lakh).
   3. The import duty will be only 15% instead of the usual rate.
   4. This lower tax will be allowed for five years from the date of approval.
3. Import Limit:
   1. Only 8,000 electric cars can be imported each year under this low tax.
   2. If a company does not use the full limit, it can use the leftover in the next year.
4. Minimum Investment Rule:
   1. To get this benefit, a company must invest at least ₹4,150 crore (around $500 million) in India.
   2. This money must be invested within three years of getting approval.
   3. There is no upper limit. A company can invest more if it wants.
5. How Can Investment Be Used?
   1. The money must be used to build electric vehicles in India.
   2. It can be spent on things like machines, equipment, new factory buildings, and research.
   3. Land costs do not count.
   4. Spending on buildings is allowed up to 10% of the investment.
   5. Money can also be used for building EV charging stations, up to 5% of the total.
6. Domestic Value Addition (DVA):
   1. Companies must make at least 25% of the car parts in India within 3 years.
   2. Within 5 years, this must go up to 50%.
   3. Government-approved agencies will check this.
   4. They will follow the same rules used in the PLI Auto Scheme.
7. Who Can Apply?
   1. Only strong and big car companies can apply.
   2. They must have made at least ₹10,000 crore from making vehicles around the world.
   3. They must also own at least ₹3,000 crore in fixed assets.
   4. These numbers must be shown in their latest audited financial reports.

What is the Significance of the Scheme?
 

1. Boost to ‘Make in India’ and Global Manufacturing Hub: SPMEPCI is a cornerstone initiative to establish India as a premier global destination for EV manufacturing and innovation.
   1. The scheme mandates a minimum investment of ₹4,150 crore (approx. $500 million) from approved applicants, ensuring only serious players with global scale participate.
   2. By requiring manufacturers to achieve at least 25% domestic value addition (DVA) within three years and 50% within five years, the scheme directly strengthens the ‘Make in India’ and ‘Aatmanirbhar Bharat’ missions, fostering indigenous capabilities and technology transfer.
   3. The policy allows for up to 8,000 fully built electric cars (CBUs) to be imported annually at a reduced 15% customs duty (down from rates as high as 110%), but only for companies committed to local manufacturing, thus balancing access to cutting-edge technology with domestic industrial growth.
2. Job Creation: The significant investment and localization requirements under SPMEPCI are expected to generate thousands of direct and indirect jobs in manufacturing, R&D, supply chain, and supporting EV infrastructure.
   1. The scheme’s focus on building new plants, machinery, and R&D centers will create high-quality employment opportunities, from factory floor workers to engineers and managers.
3. Less Oil Use: By accelerating domestic EV production and adoption, SPMEPCI will help reduce India’s reliance on imported oil.
   1. With the transport sector accounting for 40% of oil consumption, this shift is crucial for energy security and reducing the national oil import bill, which was $158.4 billion in FY2023.
   2. The scheme’s alignment with India’s 2030 EV penetration targets will further drive down fossil fuel usage.
4. Cleaner Environment: SPMEPCI is directly linked to India’s climate goals, including achieving net zero emission target by 2070.
   1. Each EV manufactured and sold under this scheme will help avoid millions of tons of CO₂ emissions annually, contributing to improved air quality and public health.
   2. The policy’s emphasis on rapid localization ensures that environmental benefits are realized not just through cleaner vehicles, but also by building a sustainable domestic supply chain.
5. Global Investment and Technology Transfer: The scheme’s eligibility criteria, requiring applicants to have global automotive revenue exceeding ₹10,000 crore and fixed assets of at least ₹3,000 crore are designed to attract major international players and ensure long-term commitment.
   1. SPMEPCI’s incentives have already drawn interest from global giants like Tesla and Nio, who are evaluating local manufacturing in India, thereby accelerating technology transfer and fostering competition.
6. The scheme’s structure, including strict bank guarantee requirements and investment milestones, provides regulatory certainty and financial safeguards, making India an attractive and secure destination for EV investment.

What are the Challenges Related to The Scheme?

1. Lack of Interest from Big Companies:
   1. Despite the SPMEPCI offering reduced import duties and incentives, Tesla, one of the world’s leading EV makers, has shown no firm interest in manufacturing in India.
2. Local Industry Concerns:
   1. Indian carmakers like Tata Motors and Maruti Suzuki are worried about the new scheme. They think that allowing foreign companies to import up to 8,000 expensive electric cars every year at low tax (15%) could give those companies an unfair advantage in the high-end market. This might hurt the sales of Indian electric cars.
   2. The rule that companies must use more Indian-made parts over time (25% in 3 years and 50% in 5 years) is meant to protect Indian companies. But there is a fear that foreign car imports in the beginning could disturb the market before Indian companies are ready with their own electric cars.
3. High Cost of EVs:
   1. The scheme allows companies to bring in electric cars that cost at least $35,000 (around ₹29 lakh). This means only costly, high-end cars can be imported with low tax. But in India, most people buy cars that cost much less. So, these expensive cars will be too costly for most Indian buyers.

Note: The term CIF value of $35,000 (about ₹29 lakh) means the total cost of an imported electric car including three main components: Cost of the car itself (the price paid to the seller), Insurance cost to cover the car during shipping, Freight cost for transporting the car by sea or inland waterway to the Indian port. The CIF price is the price of the car delivered at the port in India before any import duties or taxes are added.

3. 2. This focus on premium imports may limit the scheme’s impact on mass-market EV adoption, as the majority of Indian buyers still find EVs expensive compared to petrol or diesel alternatives.
4. Charging Infrastructure:
   1. India’s EV charging infrastructure remains underdeveloped, especially outside major cities. While the scheme allows up to 5% of investment to be directed towards charging infrastructure, the pace of rollout is still slow relative to the ambitious manufacturing targets.
   2. The lack of widespread, reliable charging stations continues to be a major barrier to both consumer adoption and large-scale manufacturing, as automakers are hesitant to ramp up production without supporting infrastructure.
5. Slow Technology Transfer:
   1. The SPMEPCI mandates increasing levels of domestic value addition, but genuine technology transfer from foreign to Indian firms is not guaranteed. Global companies may prefer to keep critical technology and high-value components within their own supply chains, limiting the spillover benefits for local industry.
   2. There are rules to check how much of the car is made in India (DVA) and to monitor if companies are following the scheme properly. But it is still hard to make sure that foreign companies will share their advanced knowledge, like battery technology, software, and electronics.

Way Forward
 

1. Active Engagement & Flexible Timelines: The government should continue direct engagement with global leaders like Tesla and address their operational concerns. Flexible timelines for plant setup and phased investment requirements could make India more attractive, especially as Tesla’s current focus is on showrooms and imports, not immediate manufacturing.
2. Policy Stability: Clear, stable policies and a transparent application process will help build trust and encourage long-term commitments from global players.
3. Balanced Import Quotas: Regularly review and adjust the annual import cap (currently 8,000 units at 15% duty) to ensure it does not unfairly disadvantage Indian automakers in the premium segment.
4. Support for Indian Companies: Offer targeted incentives, R&D grants, and easier access to credit for Indian EV makers like Tata and Maruti to help them upgrade technology and scale production. Encourage collaborations and joint ventures between Indian and foreign firms to facilitate knowledge sharing.
5. Strict Enforcement of DVA: Ensure robust monitoring and certification of Domestic Value Addition (DVA) milestones (25% in 3 years, 50% in 5 years) to protect and nurture local supply chains.
6. Incentives for Affordable Models: Expand the scheme or introduce parallel incentives for the development and local manufacturing of lower-cost EVs, making electric cars accessible to a wider segment of Indian buyers.
7. Subsidies and Tax Benefits: Continue and enhance purchase subsidies, GST reductions, and registration fee waivers for affordable EVs to stimulate mass-market adoption.
8. Public-Private Partnerships: Encourage collaboration between government bodies and private firms to build, operate, and maintain a robust, nationwide EV charging network.

 

Domestic Value Addition (DVA): DVA is the percentage of a vehicle’s value that is created within India through local manufacturing, use of Indian parts, labor, and processes rather than being imported from other countries. Why is DVA important? The SPMEPCI scheme requires companies to achieve at least 25% DVA within 3 years and 50% DVA within 5 years for their locally manufactured electric cars. This ensures that more of the car is truly “Made in India,” supporting local industry, jobs, and technology growth. In simple terms, DVA measures how much of a car’s value comes from Indian sources, helping ensure real local manufacturing instead of just assembling imported parts.

 

Ensure IAS Mains Question: Q. Discuss the objectives and significance of the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) announced in June 2025. Critically analyze the potential challenges in its implementation and suggest measures to ensure its success in making India a global hub for electric vehicle manufacturing. (250 words)

 

Ensure IAS MCQs. Q. Consider the following statements with respect to the ‘Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI)’: The scheme allows approved companies to import up to 8,000 electric cars annually at a reduced customs duty of 15%. The scheme is designed to support India’s net-zero emission target by 2070. The scheme mandates achieving 50% domestic value addition (DVA) within three years of approval. How many of the above statements is/are correct? (A) Only one (B) Only two (C) All three (D) None Ans: B Exp: The SPMEPCI allows approved companies to import up to 8,000 fully built electric cars (CBUs) annually at a reduced customs duty of 15%. Hence, statement 1 is correct. The minimum investment required is ₹4,150 crore (approximately $500 million), not ₹10,000 crore. The scheme is designed to support India’s net-zero emission target by 2070. Hence, statement 2 is correct. The scheme requires 25% DVA within three years and 50% DVA within five years, not three years. Hence, statement 3 is not correct. Thus, option B is correct.

 

Frequently Asked Questions (FAQs)

Q1. What is the SPMEPCI scheme launched by the Indian government in 2025?

Answer:
 The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) is a government initiative announced on June 2, 2025, aimed at boosting electric vehicle (EV) manufacturing in India. It offers reduced import duties for foreign EV makers who commit to local manufacturing, ensuring technology transfer, job creation, and support for India's net-zero emission goals by 2070.

Q2. How does the SPMEPCI scheme benefit foreign electric vehicle manufacturers?

Answer:
 Approved foreign EV companies under SPMEPCI can import up to 8,000 fully built electric cars annually at a reduced import duty of 15% (down from rates up to 110%). However, to avail of this benefit, they must invest at least ₹4,150 crore ($500 million) in local manufacturing within three years and meet strict domestic value addition norms.

Q3. What are the key investment and domestic manufacturing requirements under the SPMEPCI scheme?

Answer:
 To qualify, companies must:

1. Invest a minimum of ₹4,150 crore within three years.
2. Achieve at least 25% domestic value addition (DVA) within three years, increasing to 50% in five years.
3. Use the investment for setting up EV plants, R&D, and charging infrastructure (land cost not included).
    These rules aim to ensure “Make in India” and self-reliance in the EV sector.

Q4. How does the SPMEPCI scheme support India’s climate and energy goals?

Answer:
 SPMEPCI helps reduce India’s dependence on imported oil, especially in the transport sector, which accounts for 40% of oil usage. By increasing EV production and adoption, it contributes to lower carbon emissions and directly supports India’s net-zero target by 2070, enhancing air quality and public health.

Q5. What are the main concerns raised by Indian automakers regarding SPMEPCI?

Answer:
 Indian automakers like Tata Motors and Maruti Suzuki worry that allowing foreign companies to import up to 8,000 luxury EVs at a reduced duty may hurt the domestic high-end market. There are also concerns that initial imports could disrupt the local EV industry before Indian brands become globally competitive.

Q6. Who is eligible to apply for benefits under the SPMEPCI scheme?

Answer:
 Only financially strong global car manufacturers can apply. Eligible companies must have:

1. Minimum global automotive revenue of ₹10,000 crore
2. Fixed assets of at least ₹3,000 crore
    These criteria ensure that only serious and capable players with long-term manufacturing intent participate.

Q7. What are the challenges in implementing the SPMEPCI scheme effectively?

Answer:
Challenges include:

1. Limited interest from key players like Tesla in manufacturing locally
2. Concerns over market disruption by high-end imports
3. High EV costs, making them unaffordable for mass buyers
4. Inadequate charging infrastructure
5. Uncertainty over real technology transfer from foreign firms
    Addressing these issues will be key to achieving the scheme’s goal of making India a global EV manufacturing hub.

Also Read
NCERT Books For UPSC	UPSC Daily Current Affairs
UPSC Monthly Magazine	Best IAS Coaching in Delhi
Free MCQs for UPSC Prelims	UPSC Test Series
ENSURE IAS NOTES	Our Booklist