Why No Automaker Applied for India’s E4W Manufacturing Scheme — And What It Means for the Country’s EV Ambitions

When the government unveiled its ambitious scheme to woo global carmakers into building electric four-wheelers (E4Ws) in India, expectations were high. After all, India’s EV market is growing rapidly, global automakers are betting big on Asia, and New Delhi has been signaling strong intent to make India a major player in clean mobility manufacturing.

Yet, as the deadline closed on October 21, not a single application came in.

On Tuesday, Minister of State for Heavy Industries Bhupathiraju Srinivasa Varma confirmed in Parliament what many industry watchers had suspected — the government received zero applications under the Scheme for Promotion of Manufacturing Electric Passenger Cars in India (SPMEPCI).

For a scheme offering significantly lower import duties and a roadmap for manufacturing incentives, the absence of even one applicant is striking. And it exposes the complex challenges slowing down India’s push to attract global EV manufacturers.

The Silence Explained: Why Automakers Stayed Away

In a written reply to the Lok Sabha, Varma laid out the reasons shared by global automakers. These reasons underline a mix of geopolitical, regulatory and operational concerns that have made participation difficult at this moment.

1. Rare Earth Curbs Made Production Planning Risky

Automakers flagged India’s recent curbs on rare earth magnets — a critical component for EV motors — as a major deterrent. Without clarity on sourcing and long-term supply, manufacturers feared being unable to meet domestic value addition (DVA) targets mandated under the scheme.

2. India–EU FTA Negotiations Are Ongoing

For several major European car brands, the pending India-EU Free Trade Agreement is a bigger priority. Many OEMs prefer waiting for tariff outcomes under the FTA before committing billions to a new manufacturing strategy.

Varma said manufacturers would likely participate once the FTA is finalised, signaling that the timing of the SPMEPCI might have clashed with broader trade negotiations.

3. Investment Thresholds and Tight Timelines Raised Red Flags

Under SPMEPCI, participants needed to commit INR 4,150 Cr (~USD 500 million) in India, set up a manufacturing unit, and begin operations within three years. They also had to achieve:

• 25% DVA within 3 years

• 50% DVA within 5 years

OEMs told the ministry that the combination of high capital requirements and aggressive timelines would make achieving the DVA targets extremely challenging.

Extensive Outreach, But No Takers

The Ministry of Heavy Industries did not sit idle. Officials carried out a large-scale outreach effort to bring global players on board:

• Reached out to embassies of countries housing major automaker headquarters

• Invited stakeholder feedback

• Collaborated with the Ministry of External Affairs and Department of Commerce

• Engaged state governments across multiple facilitation channels

Despite the concerted push, the scheme failed to attract any applicants — a rare outcome for an initiative offering lucrative import concessions.

What the Scheme Offered: A Quick Refresher

Approved in March last year, the SPMEPCI aimed to boost domestic EV manufacturing by creating an incentive pathway for global OEMs to enter India.

Key Features of SPMEPCI

1. Import Concessions
Global automakers could import completely built units (CBUs) of electric four-wheelers costing at least $35,000 (CIF) at a reduced 15% customs duty, for up to five years.

2. Import Cap
A maximum of 8,000 units per year could be imported at the lower duty.

3. Mandatory Local Investment
Participants had to invest INR 4,150 Cr and start manufacturing within three years.

4. Local Value Addition Requirements

• 25% DVA in 3 years

• 50% DVA in 5 years

5. Strict Eligibility Criteria
Only:

• Global automotive manufacturers with annual revenue of INR 10,000 Cr+, or

• Global investment companies with fixed assets of INR 3,000 Cr+
  were allowed to apply.

By design, this was a scheme targeted at large, multinational carmakers — the likes of Tesla, BMW, Mercedes-Benz, Volkswagen, Hyundai and BYD.

Interestingly, the heavy industries ministry is not considering reopening the application window or tweaking the scheme’s parameters.

This means the SPMEPCI may remain in limbo until:

• India’s rare earth policy stabilises

• India–EU FTA outcomes become clear

• Global automakers recalibrate their India strategies

For now, the government’s EV manufacturing ambitions face an unusual pause — not because of lack of interest, but because of timing, geopolitical complexity, and operational constraints.

As India continues its push to build a world-class EV ecosystem, the next move may involve rethinking incentive structures or aligning them with broader trade agreements. Until then, the empty application list stands as a reminder that in the race toward EV leadership, policy design must move in tandem with global industry realities.