Trade negotiations hit brakes on entry of EVs into India – Car News

Global EV giants pause India plans, eyeing better terms via FTAs or BTAs instead of investing under the new EV policy. Domestic automakers raise concerns over unfair competition and risks to India’s emerging EV manufacturing ecosystem.

Global electric vehicle (EV) giants, including Tesla, Volkswagen, BMW, Mercedes-Benz and Renault, have hit the brakes on plans to engage with the government’s new EV policy, opting instead to wait for more favourable terms through bilateral trade agreement (BTA) or free trade agreements (FTAs) currently under negotiation.

The scheme to promote manufacturing of electric passenger cars in India (SPMEPCI), generally referred to as the EV policy, allows for the import of up to 40,000 EVs at a significantly reduced customs duty of 15%, compared to the current 70-100%, provided companies invest a minimum of $500 million in setting up local manufacturing and meet localisation norms within a period of three years.

However, government sources and industry insiders say that talks with these global original equipment manufacturers (OEMs) have cooled significantly. The companies are now eyeing the possibility of obtaining similar or better concessions through BTA or FTAs, being negotiated with the United States and the European Union.

A senior executive at a European auto major explained the strategic rethink: “The BTA/FTA deal would be favourable for us, as the majority of European and US cars are in the premium segment in India. Investing $500 million to capture 5-10% of a relatively small premium car market is a much riskier proposition”.

Unlike the new EV policy, which mandates local investment and progressive localisation targets, like 25% within three years and 50% within five, the BTAs could offer market access without these commitments. That prospect has made the ongoing trade talks a more attractive route for international automakers.

However, Tesla appears to be preparing for an India entry regardless of the final policy route. The company has leased space for its first showroom in Mumbai’s Bandra Kurla Complex (BKC) and is in advanced talks for a second outlet in Delhi’s Aerocity. The EV maker is expected to begin with imports from its Berlin factory, pending clarity on trade terms.

While global giants weigh their options, domestic automakers and policy experts have raised red flags. Companies like Tata Motors and Mahindra & Mahindra, which have already poured significant investments into the domestic EV ecosystem, are concerned that easier import norms for foreign OEMs could derail their plans.

“We have invested significantly in developing the EV ecosystem. If the government proceeds with duty cuts on EVs, it will adversely impact the domestic market and undermine efforts to establish India as a global EV manufacturing hub,” said a senior industry executive.

Experts have also urged the government to tread carefully. If concessions are to be made under trade agreements they argue, duty reductions should apply primarily to internal combustion engine (ICE) vehicles, not EVs, as the latter segment is still at a fledgling stage in the country.

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This article was first uploaded on April thirteen, twenty twenty-five, at twenty-three minutes past ten in the night.

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