India’s EV Policy Likely to Change Post New Trade Agreements

New Delhi, Apr 25 (KNN) The Indian government is considering revising its flagship electric vehicle (EV) manufacturing policy—Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC)—based on outcomes from ongoing bilateral and free trade negotiations, a senior official confirmed.

Discussions with the US, EU, and UK may result in significant tariff reductions on imported EVs, potentially as low as 15 percent.

If trade agreements conclude with similar or better terms than SMEC, the policy may be adjusted to retain its appeal to global automakers.

Launched in March 2024, SMEC aims to position India as a global EV hub. The scheme requires a minimum investment of Rs 4,150 crore (USD 500 million), and mandates commercial production within three years and 50 per cent domestic value addition (DVA) within five.

In return, qualifying EVs priced above USD 35,000 enjoy reduced import duties—from as high as 100 per cent to 15 per cent.

However, automakers like Tesla and VinFast have voiced concerns. They’ve questioned the DVA calculation method and argued for the inclusion of prior investments toward eligibility.

VinFast, investing USD 500 million in Tamil Nadu, said the exclusion of pre-existing expenditure limits incentives.

Given the limited traction among global players, the government is now open to sweetening the deal. Possible changes include lowering the DVA threshold, slashing tariffs further, or revising investment norms.

“The scheme offers 15 per cent tariffs, but if trade deals offer similar or better rates, SMEC loses its edge,” the official explained. Any modifications, they added, would not require Cabinet clearance and could be implemented post-trade talks.

Detailed guidelines are expected only after these trade negotiations conclude. Meanwhile, queries to the Ministry of Heavy Industries remain unanswered.

(KNN Bureau)