India’s electric vehicle (EV) sector is on the brink of a major transformation with the central government poised to notify its new EV policy, originally announced in March 2023. The Times of India reported that the policy was expected to mandate a turnover of Rs 2,500 crore by the second year of operations, making it a crucial framework for global and domestic automakers. The policy is designed to attract significant foreign investments and promote local manufacturing while providing reduced import duties as an incentive for compliance.
Key provisions of the EV policy
The proposed policy allows companies to establish EV assembly operations within their existing factory premises provided they infuse a minimum of Rs 4,150 crore ($500 million) as new capital. This investment must be separate from prior expenditures on land and buildings.
The Times of India report said companies meeting these conditions will be eligible for reduced import duties of 15 per cent, a significant drop from the current 110 per cent tariff. Policy guidelines, shaped through extensive consultations with industry stakeholders, are now awaiting final approval from Heavy Industries Minister HD Kumaraswamy.
Once the policy is notified, automakers will have 120 days to apply. The policy permits annual imports of up to 8,000 premium EVs priced above $35,000 at reduced tariffs provided manufacturers establish operational production facilities within three years. The domestic value addition (DVA) requirement starts at 25 per cent and must rise to 50 per cent within five years of receiving ministry approval.
The new policy lays down strict turnover targets: Rs 2,500 crore by the second year, Rs 5,000 crore by the fourth year and Rs 7,500 crore by the fifth year from the start of manufacturing operations. If everything remains on schedule, approval letters could be issued by July or August, paving the way for immediate importation of vehicles under the new duty structure.
Tesla in India?
Tesla has long been anticipated as a major beneficiary of the policy, but its formal engagement with the Indian government remains unclear. Reports suggest that the American EV giant plans to enter India in April 2025 with a new model priced at Rs 21 lakh. Iinitially, Tesla will reportedly rely on imports from its Berlin Gigafactory gradually increasing local procurement over time.
While Tesla’s official plans are still under wraps, Reuters reported that the company has finalised two showroom locations in India—one in Mumbai’s Bandra-Kurla Complex and another in Delhi’s Aerocity. Both showrooms, approximately 5,000 square feet in size are located near airports and are part of Tesla’s initial retail expansion in India.
The Maharashtra government has reportedly offered Tesla potential manufacturing sites in Pune’s Chakan and Chikhali regions. Tesla’s presence in Pune includes an existing office and multiple suppliers, making it a viable location for future production, The Economic Times reported. Major auto manufacturers like Tata Motors, Mercedes-Benz and Volkswagen already operate production facilities in Chakan indicating strong industrial infrastructure support.
Government’s vision for the EV market
The Indian government is optimistic about the policy’s potential to attract investments beyond Tesla. Several global automakers, including Hyundai and Volkswagen Group, have expressed interest, though their investment commitments remain uncertain. The policy’s structured approach aims to ensure that new entrants contribute significantly to India’s EV ecosystem rather than merely using the country as a dumping ground for imported vehicles.
According to Indian Transport and Logistics News, India’s EV market has witnessed a staggering 500 per cent growth in sales between 2021 and 2023 with over 1.3 million EVs sold in the financial year 2024 alone.
Projections indicate that the sector could reach $7.09 billion by 2025 and present a $206 billion opportunity by 2030. This growth trajectory is supported by an estimated $180 billion in cumulative investments.
Initiatives taken by the government such as the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme have played a crucial role in driving EV adoption. Launched in 2015, the scheme’s second phase in 2019 saw a budget of Rs 10,000 crore incentivising automakers to develop subsidy-eligible EV models. This, in turn, has helped bridge the Total Cost of Ownership gap between EVs and traditional internal combustion engine vehicles, making EVs a more attractive option for consumers.
On March 15, 2024, India officially unveiled its revised EV policy, offering incentives to foreign EV makers, including Tesla and Vietnamese automaker VinFast. According to Mint, the new framework allowed automakers to import up to 8,000 EVs priced at $35,000 or above at a reduced import duty of 15 per cent (down from 70 per cent), provided they invest at least $500 million within three years and achieve 50 per cent domestic value addition in that period.
However, Indian automakers such as Tata Motors and Mahindra & Mahindra have lobbied to raise the minimum import price threshold to $35,000 to protect their market share. Both companies are developing premium EVs within the same price bracket and fear that a flood of foreign imports could undermine their investment efforts.
Originally, Tesla had pushed for a lower $25,000 threshold to accommodate its entry-level vehicle, but the final policy appeared to favour higher-end models such as the Tesla Model 3, which sells for approximately $40,000 globally.
India’s EV supply chain
According to a piece EV Supply Chain in India by Rinki Sisodia in EV Mechanica, India’s EV supply chain is poised for significant growth, but several challenges remain, particularly in raw material sourcing, battery manufacturing, infrastructure development and recycling.
India lacks key minerals such as lithium, cobalt and nickel relying heavily on imports from countries like Australia, Chile and Indonesia. This dependence exposes the country to price fluctuations and geopolitical risks. To address this, the government is promoting domestic exploration and refining, though regulatory and environmental hurdles persist.
Battery manufacturing, which accounts for 30-40 per cent of an EV’s cost, is another critical area. Currently, most batteries are imported from China, South Korea and Japan. However, Indian companies like Tata Chemicals, Amara Raja Batteries and Exide Industries are ramping up local production aided by the Production-Linked Incentive (PLI) scheme.
The automobile sector is rapidly embracing electric mobility, with companies like Tata Motors, Mahindra & Mahindra, Ather Energy and Ola Electric expanding their EV offerings. However, inadequate charging infrastructure remains a major bottleneck.
While the number of charging stations is increasing, it is still insufficient to meet rising demand. The government’s Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme is helping fund new installations.
Government policies play a key role in shaping the EV ecosystem. Central initiatives such as FAME I & II, the National Electric Mobility Mission Plan (NEMMP) and the PLI scheme for battery manufacturing aim to reduce import dependence and strengthen domestic production.
Some of the state governments are also offering tax rebates and incentives to boost EV adoption. Strengthening local supply chains, expanding infrastructure and reducing import dependency will be crucial for India’s successful transition to electric mobility.
Tata Motors’ competitive strategy
As Tesla gears up for its Indian debut, domestic players are ramping up efforts to retain market dominance. In February 2025, Tata Motors announced limited-period offers to celebrate surpassing 200,000 EV sales, providing exchange bonuses of up to Rs 50,000 and 100 per cent on-road financing with zero down payment, the Economic Times reported.
Tata Motors currently offers five electric models in India: Tiago EV, Tigor EV, Punch EV, Nexon EV and Curvv EV, with prices starting at Rs 7.99 lakh. Despite selling 61,496 EV units in 2024—up from 60,100 units in 2023—the company’s market share declined from 73 per cent in 2023 to 62 per cent in 2024 due to increased competition.
Tesla’s strategic partnership with Tata Electronics to acquire semiconductor chips for its global operations has further fuelled speculation about deeper collaborations between the two companies. According to the Times of India in April 2024, the deal was finalised discreetly, highlighting Tesla’s growing interest in India beyond immediate revenue generation.
An electrifying journey
India’s new EV policy marks a critical step toward fostering a robust electric vehicle ecosystem while balancing foreign investments and domestic interests. By offering reduced import duties and structured investment guidelines, the government aims to attract global players like Tesla while ensuring that local manufacturing remains a priority. However, with legacy automakers like Tata Motors and Mahindra & Mahindra pushing for policy safeguards, the competitive landscape is set for a significant shake-up.
Tesla’s imminent arrival and India’s evolving policy framework set the stage for a dynamic shift in the country’s automobile sector. Whether Tesla’s ‘top-down’ strategy—starting with high-end models before introducing affordable ones—proves successful remains to be seen. Regardless, the new policy lays the foundation for India’s long-term ambitions in the global EV revolution, ensuring that the country not only becomes a major market but also an essential manufacturing hub for the future of mobility.
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