Govt issues guidelines for eletric car manufacturing scheme, offers major import tax cuts for local production

The Union government has officially notified the guidelines for a new scheme aimed at promoting the domestic manufacturing of electric passenger vehicles, the ministry of heavy industries said on Monday, paving the way for global investment and positioning India as a key player in the electric vehicle (EV) ecosystem.

The scheme has been designed to attract fresh investment from global EV manufacturers, promote the “Make in India” initiative, generate employment, and support India's transition to a cleaner mobility future.

Reduced customs duty for CBU imports

The scheme allows approved applicants to import Completely Built Units (CBUs) of electric four-wheelers (e-4Ws) with a minimum Cost, Insurance and Freight (CIF) value of USD 35,000 at a reduced customs duty of 15% for a period of five years from the date of application approval. This benefit, however, is capped at 8,000 units annually, with unutilised limits allowed to be carried over.

The total customs duty foregone through this benefit will be restricted to the lower of either ₹6,484 crore or the actual investment made by the applicant under the scheme, which must be at least ₹4,150 crore.

Investment commitments and operational deadlines

Under the scheme, applicants must commit to a minimum investment of ₹4,150 crore within a three-year window from the date of approval. There is no upper limit on the investment amount. The manufacturing facility for the eligible EVs must be operational within three years.

The investment should be directed towards establishing new domestic manufacturing capabilities, including expenditure on new plant, machinery, equipment, and engineering research and development.

Expenditures on land acquisition are excluded, while buildings and charging infrastructure are admissible, provided they do not exceed 10 percent of the committed investment.

If the investment is made under a brownfield project, a clearly demarcated boundary separating the new EV facility from existing operations must be established.

Domestic Value Addition (DVA) targets

The scheme mandates minimum Domestic Value Addition of 25% within three years, and 50% within five years, from the date of issuance of the approval letter.

The methodology for assessing DVA will be based on the Standard Operating Procedure outlined under the Production Linked Incentive (PLI) Scheme for the Automobile and Auto Component sectors. Certification of DVA will be conducted by testing agencies approved by the MHI.

Application process

The applicants will be required to furnish a bank guarantee from a scheduled commercial bank in India. The guarantee must be equal to either the total customs duty foregone or ₹4,150 crore, whichever is higher, and must remain valid throughout the duration of the scheme.

The window for submitting applications will remain open for a period of 120 days from the date of notification, and MHI reserves the right to reopen it as needed until March 15, 2026.

A non-refundable application fee of ₹5,00,000 will be levied at the time of submission.

The formal notice inviting applications will be published soon on the official website of the Ministry of Heavy Industries.

Eligibility Criteria

To qualify, applicants must meet the following thresholds based on their latest audited annual financials:

*Group Companies are defined as those entities with at least 26% mutual voting rights.