Indias Ambitious EV Policy Encounters Roadblocks: Global Automakers Reluctant to Engage

India is launching a new flagship electric vehicle initiative aimed at attracting international car manufacturers to produce vehicles locally. However, it’s uncertain if Tesla Inc. will take the bait.

The government, under the leadership of Narendra Modi, will soon begin accepting applications for the EV incentive scheme introduced in March of last year, as noted by HD Kumaraswamy, India’s minister for heavy industries and steel, during a press briefing in New Delhi on Monday. Bloomberg News shared this information earlier today.

This initiative proposes to reduce the import duty to 15 percent on electric vehicles costing $35,000 (approximately Rs. 30 lakh), provided the company invests at least Rs. 4,150 crore, or about $500 million, to establish a local plant within three years. Up to 8,000 vehicles per year can be brought in at this lower duty rate.

However, Tesla is unlikely to engage as it prefers to operate through dealerships and showrooms for selling imported vehicles rather than manufacturing locally, according to Kumaraswamy, who did not provide further details. Tesla has been eager to enter the Indian market, but delays due to debates over import taxes and local production obligations have hindered its efforts.

BYD is also not in the cards for India, reflecting New Delhi’s ongoing concerns regarding China. India’s commerce minister expressed in an interview in April that the country must be “cautious” in permitting investments. Meanwhile, VinFast Auto is already in the process of establishing a factory in India, even prior to the implementation of the new policy.

Non-Starter

“The EV policy might prove to be a non-starter,” commented Jay Kale, an analyst at the local brokerage Elara Securities India Pvt., explaining that the absence of Tesla, BYD, and VinFast diminishes its appeal for dedicated EV manufacturers.

Nonetheless, some traditional global automakers could find opportunities by creating EV-only facilities in India and initially importing electric vehicles under this scheme, Kale noted. “However, it remains to be seen how these models will perform in India since most of these manufacturers have struggled in their domestic EV markets,” he added.

While the government is eager to enhance manufacturing within the third-largest automobile market worldwide, where the demand for EVs is on the rise, it encounters strong opposition from established local companies like Tata Motors and Mahindra & Mahindra, which have enjoyed protection from high tariffs.

Stringent Conditions

“The policy is expected to attract limited interest from foreign car manufacturers due to its demanding investment and revenue criteria,” remarked Komal Kareer, an analyst at BloombergNEF in New Delhi.

It stipulates a minimum revenue of Rs. 5,020 crore ($586 million) by the fourth year and Rs. 7,500 crore in the subsequent year for any applicant who is approved under this initiative. Those who do not meet these benchmarks could incur a penalty of up to three percent based on the revenue shortfall.

“Most automakers either lack an eligible model for customs duty exemptions or will struggle to satisfy the revenue targets,” Kareer stated.

Applications could commence as early as this month and last until March 15 of next year, according to sources familiar with the discussions who wished to remain anonymous.

© 2025 Bloomberg LP

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