India’s EV Manufacturing Push: What it means for Investors?

Introduction

On June 24, 2025, the Ministry of Heavy Industries (MHI) officially opened applications for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI)—originally approved on March 15, 2024, with final guidelines issued on June 2, 2025 (Ref).

What does the Scheme offer?

• Reduced import duty: Eligible fully-built EVs (Completely Built Units or CBUs) with Cost-Insurance-Freight(CIF) value ≥ USD 35,000 enjoy a 15% customs duty (vs ~70%) for 5 years (Ref)
• Big investment required: Manufacturers must invest ₹4,150 crore (~USD 500 m) locally and start manufacturing in India within 3 years (Ref)
• Local value-addition goals: At least 25% domestic content in 3 years, rising to 50% in 5 years (Ref)
• Import limits: Up to 8,000 EVs per year can be imported at this concessional rate (Ref)

Why This Matters?

1. Entry of Global EV giants into India
   • European and Korean companies like Mercedes‑Benz, VW, Hyundai, and Kia have shown interest in manufacturing in India once they see visibility in demand (Ref-1, Ref-2)
   • Tesla, for now, seems focused on selling rather than manufacturing locally (Ref-3)
2. Evolution of India as a manufacturing destination
   • Increase in the product offering due to global tech presence
   • Local job growth due to component localisation
   • Helps India meet ‘Make in India’, ‘Aatmanirbhar Bharat’, and Net Zero 2070 goals (Ref-4, Ref-5)
3. Development of a Strong EV Ecosystem
   • Boosts domestic EV part suppliers, research and development firms, and charging infrastructure
   • Companies focusing too much on charging (vs manufacturing) may miss out—the scheme limits charging infrastructure investments to 5% of total investments(Ref-6, Ref-7)

What Does It Mean for Stock Market Investors?

• Global automakers like Volkswagen, Hyundai, and Kia gain from cheaper imports first, then long-term from local production
• Indian EV manufacturers and suppliers (e.g., Tata Motors, Mahindra): Upside with orders, joint ventures, and more focus on component domestication
• Capital goods and component firms: Sales growth as new EV factories spring up. Battery manufacturing companies(like Exide, Amara Raja, etc.), Auto ancillaries(like Motherson Sumi, Bosch,) and Charging Infra focused Power Sector Companies (like Tata Power, Siemens, ABB, CG Power, etc.) are projected to benefit

Risks & Drawbacks

• Low participation: Big players (like Tesla) might sit it out, limiting impact (Ref-8)
• Sizable capital risk: ₹4,150 crore investments aren’t trivial—delays, cost overruns, or unmet targets could lead to penalties (including bank guarantees)
• Duty limits: Capped benefits (~₹6,484 crore per applicant) could squeeze margins if volumes underperform (Ref-9)
• Crowded competition: Several manufacturers chasing limited demand might compress pricing and profitability

Conclusion

Through this scheme, the Government of India is offering a strong incentive package to get global EV companies to build cars in India, not just sell them.

Stocks tied to EV manufacturing—cars, batteries, components, automation — stand to gain significantly. Yet, execution risks remain.

Smart investors should watch:

• Who actually applies and invests
• Timelines of factory setup
• Achievement of local content goals

If global giants follow through, India’s EV space (and associated stock market segments) could enter the fast lane. But if key players hold back, the gains may be slower or smaller.