Key highlights

• India slashes EV import duty from 110% to 15% for premium electric cars priced above $35,000.
• Carmakers must invest ₹4,150 crore and set up local manufacturing within three years to qualify.
• Tesla could benefit, along with other global EV brands, by importing 8,000 cars annually at the reduced duty.

The Indian government is preparing to introduce a new EV policy aimed at reducing import duties on premium electric vehicles. This move is expected to attract global automakers like Tesla and BYD while promoting domestic EV manufacturing. Currently, India levies a 110% import duty on EVs priced above $35,000 (approx. ₹30 lakh), making them significantly expensive. Under the upcoming policy, this duty will be slashed to 15%, provided manufacturers meet specific investment and production commitments.

Key requirements for carmakers

To qualify for the reduced import duty, EV manufacturers must fulfill the following criteria:

• Minimum investment of ₹4,150 crore ($500 million) in India, excluding past investments and costs related to land and infrastructure.
• Establish a local manufacturing facility within three years of approval.

• Meet annual turnover targets:

  • ₹2,500 crore by the second year
  • ₹5,000 crore by the fourth year
  • ₹7,500 crore by the fifth year
• Achieve 25% domestic value addition initially, increasing to 50% by the fifth year.
• Limited imports: Eligible automakers can import up to 8,000 premium EVs annually at the concessional tax rate.

The policy is awaiting final approval from the Heavy Industries Ministry, with an official announcement expected in the coming weeks. Once implemented, manufacturers will have 120 days to apply, and approval letters could be issued by July-August 2025.

Also Read: The Story Behind Tesla's India Entry

What this means for Tesla and other carmakers

Tesla has long been eyeing the Indian market but has hesitated due to high import duties and local manufacturing requirements. Under this new policy, Elon Musk's company will have to commit to setting up a plant in India within three years to benefit from the lower tariffs. However, recent statements from former US President Donald Trump opposing Tesla’s India expansion could impact Musk’s decision.

Meanwhile, BYD, which already sells EVs in India, could leverage the policy to introduce more competitive pricing. Other premium brands like Mercedes-Benz, BMW, and Audi might also take advantage of the reduced duties.

When will this policy take effect?

The government is expected to issue a formal notification soon, followed by an application window of 120 days for interested carmakers. If all conditions are met, premium EV imports at reduced tariffs could begin later in 2025.