Automakers participating in the electric vehicle (EV) manufacturing policy will need to meet prescribed revenue targets or face financial penalties, according to detailed guidelines released under the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI). Companies approved under the scheme must generate a minimum revenue of Rs 5,000 crore by the end of the fourth year and Rs 7,500 crore by the end of the fifth year from the sale of eligible electric vehicles.
Failure to meet these targets will result in penalties ranging from 1% to 3% of the revenue shortfall. If the actual revenue falls short by 5% or less of the target, no penalty will be imposed. If the revenue achieved is between 50% and less than 95% of the target, a 1% penalty on the shortfall amount will apply. For performance between 25% and less than 50%, the penalty rises to 2%. If the revenue falls below 25% of the target, the penalty increases to 3% of the shortfall.
The penalty amount will be recovered from the bank guarantee submitted by the applicant at the time of approval. The required guarantee is either $500 million or an amount equal to the total customs duty waived over five years, whichever is higher.
Union minister for heavy industries HD Kumaraswamy had said on Monday that Mercedes-Benz, Volkswagen, Skoda, Hyundai, and Kia have so far expressed interest in participating in the scheme. These companies have been part of consultations with the government. However, none of them responded to Fe’s queries regarding their participation.
The minister also confirmed that Tesla will not be manufacturing electric vehicles in India under the scheme.
The SPMEPCI was notified on March 15, 2024, to attract global EV manufacturers by offering significant import duty concessions in return for assured investment in domestic manufacturing. The guidelines announced on Monday lay down the operational framework for the scheme and open the door for applications.
Under the scheme, approved companies can import up to 40,000 electric vehicles at a reduced customs duty of 15%, compared to the standard 70–100%. However, to avail of this benefit, applicants must invest a minimum of $500 million (Rs 4,150 crore) in local production and begin manufacturing within three years of approval.
The investment must result in increasing levels of domestic value addition, 25% by the third year and 50% by the fifth year. The bank guarantee will only be refunded after these localisation targets are met.
The ministry has specified that the cost of land acquisition will not count toward the investment threshold. However, up to 10% of the total investment in main plant buildings and utilities and up to 5% in charging infrastructure will be eligible. Expenditure on new machinery, equipment, engineering R&D, and associated utilities will be fully counted. Brownfield investments will be allowed only if they are physically separate from existing facilities.
Applicants will be given 120 days to submit their proposals once the formal notification is issued, expected in the coming weeks. The ministry retains the option to reopen the application window until March 15, 2026.
To be eligible, an applicant or its affiliate must have at least Rs 10,000 crore in annual automotive manufacturing revenue and global fixed asset investments of Rs 3,000 crore. The maximum customs duty concession available to a single applicant is capped at Rs 6,484 crore.
