Elon Musk's Tesla not keen on making in India under EV incentive plan: Minister

However, other foreign automakers such as Mercedes-Benz, Skoda-Volkswagen, Hyundai and Kia have expressed interest in making electric vehicles (EV) in India, Kumaraswamy said at a press conference in New Delhi. The minister said these automakers are in discussions with their global parent companies about investing in India's EV manufacturing drive. 

“Tesla, actually, we have not expected from them. They are looking only to start two showrooms. They are not interested in manufacturing in India," Kumaraswamy said.

A senior government official echoed the minister: “As of today, this is the information that is with us. The real intent we will know when we open the application, if the company (Tesla) still feels like investing. What minister sir is telling is what people have come and told, informal info."

Announced in March 2024, the SPMEPCI scheme aimed to attract foreign EV makers to set up manufacturing units in India, by reducing the customs duty on completely built-up (CBU) units worth at least $35,000 to 15% from 70%.

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As per the scheme notification, automakers need to invest $500 million, or approximately ₹4,150 crore, in setting up a manufacturing unit in India, to be eligible to import their vehicles at the lower customs duty.

New guidelines announced by Kumaraswamy on Monday allows companies to invest in charging infrastructure as well as research and development as a part of the total ₹4,150 crore investment under the scheme to promote manufacturing of electric passenger cars in India.

Foreign electric vehicle makers can invest up to 5% of their total investment in electric vehicle charging infrastructure, the minister said.

Mint first reported on 20 February that the government was considering a plan to include EV charging infrastructure investments under the overall ₹4,150 crore investment requirement for the scheme.

Additionally, investments made towards research and development will also be included under the scheme. 

Companies that already have plants in India can add a separate manufacturing line for electric vehicles to meet the investment criteria of the scheme, senior government officials told reporters on the sidelines of the press conference. 

Officials also said dual-use facilities, such as one painting facility used to paint both electric and non-electric vehicles, would be included as investment under the scheme.

The aim of the scheme is to increase manufacturing capacity for electric vehicles in India by introducing foreign automakers to Indian markets.

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Despite consistent stakeholder discussions, the ministry of heavy industries had been unable to get electric vehicle makers on board.

Bank guarantees worth ₹4,150 crore made under the scheme will be invoked if manufacturers are unable to roll out electric cars within three years, the minister clarified on Monday.

The ministry will also notify a revenue target for the automakers who wish to make EVs in India, he said, adding that the portal to apply for the scheme's benefits will open shortly.

“This landmark initiative aligns with India’s national goals of achieving Net Zero by 2070, fostering sustainable mobility, driving economic growth, and reducing environmental impact. It is designed to firmly establish India as a premier global destination for automotive manufacturing and innovation," the minister said.

Mint reported earlier that the government was open to tweaking the scheme after India had completed negotiating foreign bilateral trade agreements. This had also prompted automakers to shift their attention towards these bilateral agreements, namely the India-US BTA, India-UK FTA and the India-EU FTA, according to a Mint report on 7 May.

The rollout of the scheme comes at a time when India's EV import landscape is undergoing rapid change, said Ajay Srivastava, co-founder, Global Trade Research Initiative (GTRI), a trade policy think tank. "The India-UK free trade agreement, already in force, is set to reduce import duties on premium UK-made electric vehicles from over 100% to just 10% over the next few years. Future FTAs with the US and the European Union are also expected to bring similar market access concessions, adding competitive pressure on Indian manufacturers," he said.

According to GTRI, any serious investment in India’s EV ecosystem must now take into account not just domestic incentives but also the broader impact of India’s trade agreements, which are likely to reshape the competitive contours of the sector for years to come.

Under the scheme, automakers also have to comply with stringent localization guidelines by achieving 25% domestic value addition in the first three years of operations, and 50% in the first five.

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“This policy also aligns well with India’s broader goal of reaching 30% electric vehicle penetration by 2030. It sends a strong signal of intent from the government to support the EV transition, not just through incentives for end-users, but also by creating a more favourable environment for manufacturing and infrastructure development," said Dhiraj Agrawal, chief business officer at Mufin Green Finance.

The success of this policy will depend on efficient implementation and complementary support systems such as financing, charging infrastructure and skill development, he added.