Car makers list ongoing India-EU FTA talks as reason for skipping EV incentive scheme

Global car makers have listed the on-going India-European Union (EU) free trade agreement (FTA) negotiations, and China's restrictions on rare earth magnet exports among reasons for not participating in India's Scheme to Promote Manufacturing of Electric Passenger Cars (SPMEPC).

“During recent stakeholder consultations, Original Equipment Manufacturers (OEMs) have conveyed that they may take decision regarding participation in the Scheme post finalization of the India-EU FTA,” Minister of State for Heavy Industries, Bhupathiraju Srinivasa Varma informed the Lok Sabha in a written response to queries.

A concessional import duty was the only incentive offered to car companies under this scheme. Sector watchers say an investment commitment on this basis would not be feasible since a possible India-EU FTA could enable this sop without the capital expenditure mandate. In addition to these issues, auto makers said the threshold investment requirements and timelines may pose a challenge, Varma added. According to the MoS, car companies are concerned the restrictions on rare earth magnets may affect the achievement of domestic value addition (DVA) targets spelled out under SPMEPC.


India announced SMEC on March 15, 2024 to encourage investment in local manufacturing of high-end electric cars. The scheme allowed imports of completely built-up electric cars that have a minimum cost, insurance and freight value of $35,000 at 15% import duty for a period of five years if companies make a minimum investment of $500 million (over Rs 4,300 crore) to start local manufacturing.