Government Launches EV Manufacturing Scheme to Boost Domestic Industry: Legal Implications and Analysis

Source: Press Information Bureau, Government of India – Original Release

The Government of India has launched the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) to catalyse the growth of domestic EV manufacturing and encourage foreign investment in the sector. This policy is aligned with India’s goals of sustainable development, net-zero emissions by 2070, and its broader vision of becoming a global EV manufacturing hub.

While the scheme presents immense opportunity, it also introduces a complex legal and regulatory framework that both domestic and international participants must navigate.

Key Highlights of the Scheme

Minimum Investment Threshold:

Approved applicants are required to invest a minimum of ₹4,150 crore (approx. USD 500 million) within three years to establish manufacturing facilities for electric four-wheelers (e-4Ws) in India.

Customs Duty Concessions:

Eligible manufacturers may import up to 8,000 electric vehicles annually as Completely Built Units (CBUs) at a reduced 15% customs duty for five years—subject to a minimum CIF value of USD 35,000 per unit.

Import Quota Rollovers:

Unused quotas from one year may be carried over, allowing flexibility in planning import volumes.

Duty Forgone Cap:

Total customs duty forgone by the government is capped at the lower of ₹6,484 crore or the actual investment made by the applicant.

Domestic Value Addition (DVA) Targets:

The scheme mandates year-wise DVA milestones to promote indigenous sourcing and supply chain development.

Legal and Regulatory Implications

1. Foreign Direct Investment (FDI) Compliance

Given the large minimum investment requirement and likely interest from global EV giants, companies must comply with India’s FDI policy. The automatic route is open for the automobile sector, but investments linked to China or countries sharing land borders with India will require prior government approval under the Press Note 3 regime.

2. Customs and Trade Law Considerations

The reduced customs duty is a deviation from the existing high tariffs on CBUs. Legal clarity will be required on:

How this preferential rate will be operationalised under the Customs Act, 1962.

Mechanisms for verification of CIF values and vehicle eligibility.

Impact on existing Free Trade Agreements and WTO compliance.

3. Intellectual Property & Technology Licensing

With foreign players potentially setting up base in India, licensing and transfer of proprietary EV technologies will raise:

IP ownership and protection issues.

Licensing arrangements under FEMA and RBI guidelines.

Patent law compliance, particularly around battery and drivetrain tech.

4. Compliance with Domestic Manufacturing Requirements

The DVA norms will likely be codified under industrial and commercial regulations. Legal advisory will be essential to:

Interpret DVA calculation rules.

Structure vendor relationships and supply chains to meet local sourcing mandates.

5. Environmental and Labour Law Compliance

EV factories will be classified under specific pollution control categories by the Central and State Pollution Control Boards. Labour law compliance under the new labour codes will also be mandatory, especially for greenfield manufacturing projects.

Conclusion

The SPMEPCI scheme presents a landmark opportunity to accelerate the domestic EV ecosystem. But the incentives come with regulatory strings attached. Stakeholders especially global EV manufacturers and Indian conglomerates must proactively assess and structure their entry strategies, supply chains, and compliance models in light of Indian investment laws, customs regulations, and manufacturing obligations.

At Trailblazer, we assist automotive and clean-tech companies in navigating India’s regulatory landscape—be it FDI structuring, compliance with duty frameworks, or drafting technology licensing agreements. Our integrated legal and policy advisory ensures that clients can unlock the benefits of such progressive schemes with confidence.

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Disclaimer: This article is based on a government press release published by the Press Information Bureau on June 3, 2025. All credits for factual content and figures go to PIB.