{"id":45164,"date":"2025-06-11T19:11:21","date_gmt":"2025-06-11T13:41:21","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=45164"},"modified":"2025-06-12T20:33:32","modified_gmt":"2025-06-12T15:03:32","slug":"india-ev-manufacturing-scheme-concerns-and-way-ahead","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/11-06-2025\/india-ev-manufacturing-scheme-concerns-and-way-ahead","title":{"rendered":"India&#8217;s EV Manufacturing Scheme: Concerns &amp; Way Ahead"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Science &amp; Technology<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recently, the Union Government recently said that it would start accepting applications from global electric car manufacturers for setting up factories in India.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About India\u2019s Automotive Market<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is currently <strong>valued at \u20b912.5 lakh crore ($150 billion)<\/strong>, and is <strong>projected to double by 2030.<\/strong><\/li>\n\n\n\n<li><strong>Passenger car<\/strong> sales are<strong> expected to grow to 9\u201311% of all vehicle sales<\/strong> by then, up from <strong>just 2.5% today,<\/strong> as electric mobility becomes central to climate action.<\/li>\n\n\n\n<li>The <strong>Union Ministry of Heavy Industries<\/strong> announced a <strong>Scheme to Promote Manufacturing of Electric Passenger Cars in India<\/strong> <strong>(SPMEPCI) <\/strong>to capitalize on this opportunity in March, 2024.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Core Proposition of SPMEPCI<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>SPMEPCI <\/strong>encourages global EV manufacturers to set up factories in India, offering them a <strong>limited window to import high-value electric cars<\/strong> (worth $35,000) at a <strong>reduced customs duty of 15% <\/strong>\u2014 far lower than the usual 110%.<\/li>\n\n\n\n<li>It is tightly capped at 8,000 units per year and subject to two conditions:\n<ul class=\"wp-block-list\">\n<li><strong>Revenue foregone<\/strong> through this incentive must not exceed the manufacturer&#8217;s capital investment.<\/li>\n\n\n\n<li>Companies need to invest at least \u20b94,150 crore, with domestic value addition of 25% by year three and 50% by year five.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Global EV Manufacturing Landscape<\/strong><br>&#8211; <strong>Surging Production and Regional Shifts:<\/strong> Global EV production reached 17.3 million units in 2024, with<strong> China leading<\/strong> at 12.4 million units, accounting for over 70% of global output.<br>1. European production stagnated at 2.4 million units, while North America saw mixed results \u2014 Mexico doubled its output, while U.S. production declined.<br>&#8211; <strong>Battery Innovations and Cost Reductions:<\/strong> Battery prices have dropped significantly, making EVs more affordable.<br>1. In China, costs fell by 30%, while Europe and the U.S. saw 10\u201315% reductions.<br>2. Manufacturers are focusing on solid-state batteries and longer-range lithium-ion technologies to improve efficiency.<br>&#8211; <strong>Market Expansion and Consumer Demand:<\/strong> EV sales are projected to grow from 15.7 million units in 2024 to 46.3 million units by 2035, at a 10.3% CAGR.<br><strong>Global Export Dominance<\/strong><br>&#8211; China topped <strong>global electric vehicle (EV) exports in 2024<\/strong>, according to the <em>Global EV Outlook 2025<\/em> by the <strong>International Energy Agency (IEA)<\/strong>.<br>&#8211; In all five emerging markets studied\u2014<strong>Brazil, India, Indonesia, Mexico, and Thailand<\/strong>\u2014<strong>Chinese OEMs<\/strong> offered <strong>EVs at lower prices<\/strong> than the average electric car, boosting adoption.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Significances of EVs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Tackling Climate Change: <\/strong>The <strong>transport sector contributes ~15%<\/strong> of global CO\u2082 emissions.\n<ul class=\"wp-block-list\">\n<li><strong>Oil dependency<\/strong> (petrol and diesel) is a major driver of this pollution.<\/li>\n\n\n\n<li><strong>Electric vehicles (EVs)<\/strong> powered by renewable energy present a cleaner alternative.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Reducing Local Air Pollution: <\/strong>Urban areas suffer from <strong>toxic air pollution<\/strong>, primarily from fossil-fuel vehicles.\n<ul class=\"wp-block-list\">\n<li>EVs can significantly <strong>cut harmful emissions<\/strong> in cities. It has direct health and quality-of-life benefits.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Saving Foreign Exchange: <\/strong>Countries like India spend vast sums on <strong>oil imports<\/strong>.\n<ul class=\"wp-block-list\">\n<li>EV adoption can <strong>reduce this burden<\/strong>, improving national economic resilience.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Concerns &amp; Challenges<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Limited Incentives for Global Investors: <\/strong>SPMEPCI offers <strong>no tax breaks, capital grants, or land\/energy subsidies<\/strong>, unlike EV policies in countries like Thailand and Mexico.<\/li>\n\n\n\n<li><strong>Stringent Localization Requirements:<\/strong> While this encourages local manufacturing, many industry players worry that <strong>India\u2019s existing supply chain isn\u2019t mature enough<\/strong> to meet these demands, leading to production delays and increased costs.<\/li>\n\n\n\n<li><strong>High Entry Barriers:<\/strong> India\u2019s scheme mandates for a minimum investment and strict domestic value addition targets.\n<ul class=\"wp-block-list\">\n<li>These <strong>thresholds may deter smaller or newer players<\/strong> from entering the Indian market.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Revenue-Based Penalties:<\/strong> Automakers need to meet revenue targets of \u20b95,000 crore in four years and \u20b97,500 crore in five years. Falling short could trigger <strong>penalties of up to 3% of the revenue gap<\/strong>, recovered from bank guarantees.\n<ul class=\"wp-block-list\">\n<li>It adds financial risk and uncertainty for participants.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Exclusion of Chinese Manufacturers:<\/strong> The scheme <strong>explicitly bars Chinese EV makers<\/strong>, including<strong> BYD, the world\u2019s largest electric car manufacturer.<\/strong>\n<ul class=\"wp-block-list\">\n<li>It limits competition and may reduce the diversity of technology and pricing options available to Indian consumers.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Limited Interest from Global Majors:<\/strong> While brands like Mercedes-Benz, Skoda, and Volkswagen have shown interest, Tesla has opted out, preferring to pay full import duties instead of investing in domestic production.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Government Initiatives and Policies<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>FAME India Scheme (Phase II):<\/strong> It aims to support the electrification of public and shared transportation.<\/li>\n\n\n\n<li><strong>E-Vehicle Policy:<\/strong> It encourages global EV manufacturers to invest in India, boosting domestic production and reducing reliance on imports.<\/li>\n\n\n\n<li><strong>PM E-DRIVE<\/strong>: It has played a crucial role in supporting commercial EV adoption, particularly in the three-wheeler segment.<\/li>\n\n\n\n<li><strong>Charging Infrastructure Expansion:<\/strong> As of mid-2024, India had over 16,000 public charging stations, significantly improving accessibility for EV users.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>There is a <strong>need to focus<\/strong> on automation and AI in manufacturing <strong>to integrate modular EV architectures<\/strong> to streamline production and cater to diverse market segments.<\/li>\n\n\n\n<li>Manufacturers need to focus on <strong>recycling materials, reducing waste, and optimizing resource<\/strong> use to lower environmental impact (sustainability &amp; circular economy).\n<ul class=\"wp-block-list\">\n<li>Bio-based die-casting lubricants are emerging as eco-friendly alternatives for precision EV parts.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Introduce Direct Incentives<\/strong> such as tax exemptions, infrastructure support, or lower-cost financing.<\/li>\n\n\n\n<li><strong>Revise Investment Thresholds<\/strong> to encourage mid-sized global manufacturers.<\/li>\n\n\n\n<li><strong>Expand Import Allowances<\/strong> beyond 8,000 units per year to give investors a better runway.<\/li>\n\n\n\n<li><strong>Strengthen Supply Chain Development<\/strong> to help meet domestic value addition targets sustainably.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Does India&#8217;s EV manufacturing scheme genuinely support industry growth, or do its numerous restrictions and caveats stifle innovation and competition?<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.thehindubusinessline.com\/opinion\/editorial\/ev-manufacturing-scheme-has-too-many-caveats\/article69678661.ece\" rel=\"nofollow noopener\" target=\"_blank\">Source: BL<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2025\/06\/UPSC-Editorial-Analysis-11-June-2025.PDF.pdf\">Download PDF<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Recently, the Union Government recently said that it would start accepting applications from global electric car manufacturers for setting up factories in India.<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-45164","post","type-post","status-publish","format-standard","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/45164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=45164"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/45164\/revisions"}],"predecessor-version":[{"id":45274,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/45164\/revisions\/45274"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=45164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=45164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=45164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}