Answer

India’s Electric Vehicle (EV) manufacturing localization scheme such as Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) etc, targets reduced import dependence and enhanced domestic value addition through incentives and localization norms, positioning India as a global EV hub attractive to foreign investment.

Provisions of Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) Localization Scheme

• Minimum Investment: Applicants must invest at least ₹4,150 crore to establish EV manufacturing facilities in India.
• Domestic Value Addition (DVA): Manufacturers must achieve 25% DVA by the 3rd year and 50% by the 5th year to boost local sourcing.
• Import Duty Concession: Completely Built Units (CBUs) priced above USD 35,000 can be imported at a reduced 15% customs duty for five years.
• Import Cap: A maximum of 8,000 electric vehicles may be imported annually or cumulatively during the five-year period.
• Bank Guarantee: A bank guarantee equal to the duty forgone or ₹4,150 crore (whichever is less) must be provided to ensure compliance.
• Eligibility and Oversight: Applicants must have global revenue of ₹10,000 crore and investment of ₹3,000 crore, with applications open for 120 days and will be monitored by a Project Management Agency (PMA) and a Standing Selection Committee (SSC).

Other Initiatives for EV Ecosystem in India

• FAME II Demand Incentives: Provides subsidies for EV adoption and charging infrastructure.
• PLI‑Auto Incentives: Offers up to 15 % incentives on domestic EV and component production.
• ACC‑Battery PLI: Supports 50 GWh of domestic battery cell capacity with ₹18,100 crore incentives.
  Eg: Targets 60 % localization in advanced chemistry cell manufacturing.
• Phased Manufacturing Programme (PMP): Enforces strict local sourcing norms from April 2025.
  Eg: Requires local assembly of 8–11 EV components to qualify for PM e‑DRIVE subsidies.
• EV Component Subsidies (EMPS & SMEC): Supports OEMs and MSMEs in building EV supply chains.
  Eg: EMPS 2024 extended to ₹778 crore, aiding 5.6 lakh e‑2W/e‑3W and supply ecosystem development.

Balance between Foreign Investment and Domestic Industrial Development

Foreign Investment Attraction

• Inclusive factory eligibility: India broadened incentives beyond new facilities to include existing plants, attracting global automakers.
  Eg: Automakers investing at least $500 million in EV production with 50% local component sourcing now qualify.
• Attracting Global Original Equipment Manufacturers (OEMs): Liberal Production-Linked Incentive (PLI) norms and 100% Foreign Direct Investment (FDI) are drawing multinational OEMs.
  Eg: Out of 74 PLI applications, 50 were from global OEMs by March 2024..
• Targeted battery investment stimulus: The ACC-PLI offers ₹18,100 crore to build advanced battery cell capacity, incentivizing multinational energy firms.
  Eg: Reliance Industries secured a 10 GWh battery cell capacity, showcasing tech investment in India.

Domestic Industrial Development

• MSME Integration in Supply Chains: The Phased Manufacturing Programme (PMP) mandates local assembly of components like motors, controllers, and PCBs thereby boosting integration of MSMEs into EV ecosystems.
• Phased Localization Roadmap: Gradual sourcing targets support capacity building.
  Eg: FAME II began with 50 % localization, with PMP raising targets further to balance growth.
• Export-linked production scaling: PLI-Auto ties incentives to incremental sales and export performance.
  Eg: With ₹25,938 crore in incentives, PLI‑Auto aims for ₹2.3 lakh crore in incremental sales , spurring global manufacturing competitiveness.

Challenges in India’s EV Localization Scheme

• Raw Material Dependency: High reliance on imported rare-earths and battery inputs.
  Eg: OEMs requested PLI sourcing relaxations due to rare-earth magnet shortages.
• Delayed Subsidy Disbursal: Administrative delays affect manufacturer cash flows.
  Eg: Only $1.7 billion of the $23 billion PLI fund has been disbursed by March 2025.
• High Capex Thresholds: Required investments may exceed capabilities, leading to partial reliance on imports.
  Eg: OEMs may import up to 40,000 units/year if committing ₹4,150 crore locally.
• Shift from Demand to Production Subsidies: Cutbacks in demand support may strain OEMs.
  Eg: FAME II budget cut by 44 % in FY 2024–25, increasing reliance on PLI.
• Weak Supply‑Chain Ecosystem: Limited domestic production of key components motor and controller assembly, delaying PMP compliance.

Way Forward

• Temporarily Ease on DVANorms: Enable import until local capacity matures.
• Digitize Subsidy Disbursal: Implement digital platforms for fast claims and redressal.
  Eg: PLI‑Auto scheme moving to ERP portals to cut compliance delays.
• Develop Critical Mineral Supply‑Chains: Invest in domestic mining and refining.
  Eg: National Critical Mineral Mission offers fiscal incentives for rare-earth extraction.
• Strengthen MSME Clusters: Provide shared testing, tooling, and certification facilities.
  Eg: EMPS ₹778 crore fund supports cluster-based component capacity building.
• Align PLI with Exports: Introduce export-linked incentives to support global competitiveness.

India’s EV localization scheme strategically balances foreign investment attraction with domestic industrial growth through robust incentives, technology partnerships, and phased localization. Addressing material supply deficits, subsidy delays, and MSME integration will be critical to transforming India into a resilient and globally competitive EV manufacturing powerhouse.

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