India open to revising EV policy for foreign automakers. Conditions apply

This could potentially encourage US-based EV maker Tesla to set up a manufacturing plant in India. The development followed a conversation between prime minister Narendra Modi and Tesla founder Elon Musk about topics of mutual interest and technological collaboration between India and the US on 18 April.

India’s policy on attracting foreign direct investment to manufacture electric cars is led by the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI). This incentivizes foreign electric vehicle (EV) makers to set up manufacturing plants in India by allowing lower import duties.

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Under the scheme, electric car makers can import up to 8,000 completely built-up units at an import duty of 15% for five years, down from the actual import duty of about 70-80%, or even higher.

The scheme, announced in March 2024, has not found any takers yet. A notification regarding the operation of the scheme is in the works, the official told reporters.

Tesla’s entry into the world’s third-largest automobile market has looked imminent, with the company posting job openings for its engineering and sales departments on LinkedIn in February.

This development comes at a time when negotiations on a bilateral trade agreement (BTA) are in full swing. Indian negotiators are in Washington for further talks after the office of the US Trade Representative confirmed the terms of reference earlier this week.

“There is a serious lack of reciprocity in the trade relationship with India,” said US Trade Representative Jamieson Greer in a statement on 21 April. 

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“These ongoing talks will help achieve balance and reciprocity by opening new markets for American goods and addressing unfair practices that harm American workers. India’s constructive engagement so far has been welcomed and I look forward to creating new opportunities for workers, farmers, and entrepreneurs in both countries.”

India-US BTA

Discussions on the agreement, which started in February, will now address trade barriers between the two countries, as per a fact-sheet released by the US Trade Representative’s office.

On 2 April, US President Donald Trump announced reciprocal tariffs against multiple major economies including India. These tariffs, cited by President Trump as a measure to protect the interests of American workers and industries, included a 10% baseline tariff on all foreign goods, as well as a 25% tariff on foreign-made cars.

In a 31 March report titled ‘2025 National Trade Estimate report’, the US Trade Representative flagged several trade barriers in India, including high tariffs, digital restrictions and other policy decisions. 

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Mint reported on 1 April that India’s customs procedures also drew scrutiny in the report, with the US raising concerns over sudden tariff changes, lack of prior notice, and inconsistent implementation across different regions.

Queries emailed to the Department for Promotion of Industry and Internal Trade (DPIIT), ministry of heavy industries (MHI), and Tesla Inc. did not elicit an immediate response.