India is hitting the accelerator on its electric vehicle ambitions, unveiling a new e-vehicle incentive scheme that aims to establish the country as a leading destination for EV manufacturing, enticing global powerhouses like Tesla with significant tax breaks.

What Happened: Announced on Friday, this move is part of India’s broader strategy to become an attractive destination for international capital, specifically in the EV domain.

Under this new scheme, select electric vehicles will see a reduction in import taxes, but there’s a catch: companies must commit to pouring at least $500 million (₹4,150 crore) into local manufacturing efforts and promise to get their factories running within a three-year window.

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The government, serious about electrifying India’s future, will allow companies to invest without any cap and mandates a five-year plan to source 50% of the vehicle’s value locally. It has also tailored customs duties to support this vision, tying certain perks to investment milestones and production commitments. To secure these promises, the government requires a bank guarantee, ensuring that these ambitious goals turn into reality.

Clearing the way for Tesla? The policy announcement comes days after India's Commerce and Industry Minister, Piyush Goyal, emphasised that India will not customise its policies to accommodate specific companies like Tesla.

Instead, the country aims to foster an environment conducive to attracting electric vehicle (EV) manufacturers globally. Goyal's statement comes in response to Tesla's request for tariff concessions as a precondition to establishing a manufacturing plant in India.

Until now, high import duties — 100% for cars above ₹33 lakh and 60% below — have been a roadblock for Tesla in India. The company has shown readiness to invest a hefty $2 billion in India, contingent on a more favourable import duty of 15% in the initial years.

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