Key elements of the scheme, including the formation of an inter-ministerial sanctioning committee, are still pending.
20 Dec 2024 | 4764 Views | By Shahkar Abidi
India's much-anticipated new EV policy is caught in a curious state of limbo, it seems; awaiting clarity about the fate of the Scheme to Promote Manufacturing of Electric Passenger Cars (SMEC) policy. This scheme, designed to make India as a global EV hub, was unveiled with much fanfare in mid-March this year, but its operational guidelines remain elusive, even after ...
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India's much-anticipated new EV policy is caught in a curious state of limbo, it seems; awaiting clarity about the fate of the Scheme to Promote Manufacturing of Electric Passenger Cars (SMEC) policy. This scheme, designed to make India as a global EV hub, was unveiled with much fanfare in mid-March this year, but its operational guidelines remain elusive, even after nearly nine months. The delay has cast a pall of uncertainty over the entire EV sector, leaving industry players anxiously awaiting a definitive roadmap.
The Ministry of Heavy Industries, in a response to Autocar Professional obtained via a Right to Information (RTI) query, stated that key elements of the scheme—including the formation of an inter-ministerial sanctioning committee —are still pending.
Until the guidelines are finalized, the inter-ministerial committee cannot begin its work. The project management agency (PMA) role has been handed to IFCI, but the ministry did not reveal the comments/feedback received from original equipment manufacturers (OEMs) and industry bodies, citing exemptions available under Section 8 (1) (e) of the RTI Act 2005.
Prominent automakers like Tata Motors, Mahindra & Mahindra, and global players such as Mercedes-Benz, BMW, and others have reportedly expressed concerns about SMEC. Industry insiders suggest that the scheme’s focus on attracting foreign manufacturers—like Tesla, which has long criticized India’s steep import duties—has raised alarms among domestic OEMs. Critics worry that the policy could destabilize local players who have painstakingly built supply chains in India over decades, only to face competition from newcomers benefiting from relaxed tariffs.
Terms of engagement
On March 15, 2024, when the central government unveiled the Scheme to Promote Manufacturing of Electric Passenger Cars (SMEC), the message seemed clear: India was ready to position itself as a global hub for electric vehicles. The ambitious policy, which promised sharply reduced import tariffs in exchange for substantial domestic investments, was largely seen to have been made for attracting electric vehicle giant Tesla's entry into the country. SMEC’s blueprint offers tantalizing incentives for global automakers.
The headline measure: a drastic reduction in import duties on electric vehicles from 70–100% to 15% for five years. In return, companies must commit to investing at least $500 million (Rs 4,150 crore) in domestic manufacturing within three years. This includes setting up dedicated production lines, meeting phased domestic value-addition targets (25% in three years, rising to 50% by year five), and adhering to a maximum annual import quota of 8,000 EVs at the reduced duty rate.
A course correction
For all its ambition, the scheme appears haunted by the ghost of Tesla. The American EV giant, reportedly shelved plans to enter the market earlier this year, despite the government’s overtures. The move forced policymakers to rethink their approach, with reports now suggesting tweaks to SMEC that might make it more attractive to automakers already operating in India.
In a recent development reported by Reuters, the government is considering extending SMEC’s benefits to EV investments at existing factories, provided the projects include separate production lines for electric vehicles. This shift could open the door for companies like Hyundai and Toyota, to leverage the scheme without building entirely new plants. Investments in tooling and machinery for EV production would also count toward the $500 million threshold, even if those tools serve dual purposes for other vehicle types.
Moreover, the government is reportedly mulling a minimum revenue target for EV production to ensure a level playing field among applicants. While the details remain under wraps, the recalibrated approach could mark a significant turning point in India’s EV strategy.
The clock is ticking
As the government goes slow on finalizing the operational guidelines, the stakes are high. India’s EV market, while nascent, is poised for exponential growth, driven by rising consumer interest, improving infrastructure, and government incentives. But the window of opportunity won’t stay open forever. For global automakers weighing their options, India’s bureaucratic delays could prove frustrating. For domestic manufacturers, clarity on the rules will determine whether they compete on equal footing—or find themselves edged out of their own market.
In an industry where timing is crucial, the SMEC’s sluggish rollout risks undermining the very confidence it sought to inspire. Whether India can live up to its vision of becoming a global EV hub will depend not just on policy ambition but also on its ability to deliver results. For now, automakers are watching—and waiting.