India is at a pivotal point in its electric vehicle (EV) strategy. With the launch of a new EV import tariff policy under the “Scheme to Promote Manufacturing of Electric Passenger Cars in India” (SPMEPCI), the country aims to attract global EV players while boosting domestic production. This policy shift has drawn global attention, especially in comparison to import regulations and EV incentives in the U.S. and U.K.
In this comprehensive post, we’ll break down India’s latest EV import duty reforms, compare them with American and British policies, and explore the broader implications for global EV markets.
India’s Revised EV Import Policy: A Closer Look
India has long imposed high import duties on EVs, especially for Completely Built Units (CBUs), to protect local manufacturers and promote self-reliance. However, 2025 marks a significant shift with the introduction of a more nuanced policy to encourage foreign automakers to invest in the country.
1. Existing Tariff Framework
Before the recent policy announcement, India levied:
- 100% to 110% import duty on CBU EVs priced above $40,000
- 60% import duty for EVs under $40,000
This effectively priced out many foreign models from the Indian market and discouraged brands like Tesla and Rivian from entering the country without local partnerships.
2. The New SPMEPCI Policy Explained
Under the SPMEPCI policy introduced in early 2025, India will allow EV imports at a concessional 15% duty (from 100–110%) if the importing company agrees to specific localization and investment terms:
- Minimum investment of ₹4,150 crore (~$500 million) within 3 years
- Manufacturing plant setup within 3 years
- Local Value Addition (LVA): 25% by the 3rd year, 50% by the 5th year
- Import cap of 8,000 EVs per year per company
- Applies only to EVs priced above $35,000
- Concession valid for 5 years
This policy is crafted to balance foreign entry with local job creation, technology transfer, and value addition.
3. Strategic Goals Behind India’s Policy
India’s updated tariff policy aims to:
- Encourage top EV manufacturers like Tesla, Volkswagen, Hyundai, and BYD to enter or expand in India
- Ensure that the Indian automotive ecosystem benefits through localization
- Build robust EV supply chains and boost domestic battery and component manufacturing
- Offer premium EV options to Indian consumers while keeping mass-market models shielded from foreign competition
However, the success of this policy depends on whether global players are willing to commit long-term investment in India under these terms.
United States: Protectionism + Domestic Incentives
1. Trump-Era and Post-2025 Tariffs
In the U.S., the return of aggressive trade policies has led to renewed tariffs on EVs and components from strategic competitors. Currently, import duties include:
- 25% on all vehicle imports (from non-FTA countries)
- Additional 10% general import duty
- Special tariffs on Chinese-origin batteries and electronics
These tariffs are part of the broader economic protectionism policies reintroduced in 2025 to reduce dependency on foreign manufacturing—especially from China.
2. The Inflation Reduction Act (IRA)
Rather than lowering EV import tariffs, the U.S. government uses incentives to promote domestic production:
- Up to $7,500 tax credit per EV under strict assembly and material sourcing rules
- Credit only available to vehicles assembled in North America
- Restrictions on batteries or minerals sourced from “foreign entities of concern” (e.g., China)
This strategy does not rely on tariff concessions but on making foreign EVs ineligible for lucrative incentives—thereby tilting consumer preference toward locally made models.
3. Import Impact
Foreign EV makers like Hyundai, Toyota, and BMW have been compelled to establish plants in the U.S. or North America to remain competitive. For Indian manufacturers eyeing the U.S. market, compliance with IRA guidelines is essential.
United Kingdom: Targeted Free Trade and Strategic Partnerships
1. The UK’s Global Tariff Framework
Post-Brexit, the U.K. implemented a Global Tariff Regime, with the following relevant details:
- 10% import duty on passenger EVs from non-FTA nations
- Lower or zero-duty for countries with bilateral trade agreements (e.g., Japan, South Korea)
- Battery components and modules also subject to varying duties based on origin
Unlike India or the U.S., the U.K. maintains a relatively open and moderate import regime, focusing on partnership rather than hardline protectionism.
2. India-UK Free Trade Agreement (FTA)
In 2025, the U.K. and India entered into a Free Trade Agreement offering:
- Duty-free import of 22,000 premium EVs annually from the U.K. to India
- Reduction of duties on EV parts and batteries
- Promotion of joint ventures and R&D collaboration
This bilateral approach allows mutual benefits and reflects a trade philosophy based on targeted market access and mutual investment, instead of sweeping blanket tariffs.
3. Strategic Focus
- The U.K. focuses on enhancing its EV ecosystem via partnerships.
- Local battery manufacturing is encouraged through grants and green investment.
- Regulations on battery origin (from 2027) will enforce sourcing rules for local manufacturers.
Side-by-Side Comparison: India vs. U.S. vs. U.K.
| Policy Feature | India | U.S. | U.K. |
|---|---|---|---|
| Base Import Tariff | 100–110% | 25% + 10% | 10% (Global Tariff) |
| Concessional Tariff | 15% (under SPMEPCI) | None | 10% or 0% (via FTAs) |
| Quota for EV Imports | 8,000 units/year | No quota, but high tariffs | 22,000 units/year (FTA with India) |
| Investment Requirement | ₹4,150 crore (~$500M) | Not mandatory, but IRA incentivizes | Optional under bilateral FTAs |
| Local Assembly Mandate | Within 3 years | Mandatory for tax credits | Not required, but preferred |
| Battery Origin Rules | 25–50% local content by Y5 | Strict IRA sourcing rules | New battery rules begin 2027 |
| Eligibility Criteria | $35,000+ vehicles only | North America production required | Premium class under FTA |
Market Implications
1. For Foreign Automakers
- India: Opportunity to tap a growing market, but requires long-term commitment and localized operations.
- U.S.: Hard to succeed through imports alone; setting up local manufacturing is the only viable option.
- U.K.: Moderate market access and flexibility, good for export-oriented companies from India or Japan.
2. For Indian EV Manufacturers
- In India: Policies protect local champions like Tata, Mahindra, and Ola from being overwhelmed by foreign luxury EVs.
- In the U.S.: Entry is difficult without U.S.-based assembly and battery sourcing.
- In the U.K.: Easiest to access via bilateral partnerships and trade deals.
3. For Consumers
- India: New tariff rules may introduce high-end global EVs but at a limited scale.
- U.S.: Consumers benefit from locally made EVs through tax credits.
- U.K.: Broad range of EVs available due to liberal trade and FTA flexibility.
Frequently Asked Questions (FAQs)
1. What is India’s new EV import policy?
It’s a conditional scheme that offers a reduced 15% import duty for premium EVs priced above $35,000—capped at 8,000 units/year—for companies investing ₹4,150 crore and building local manufacturing capacity.
2. Can foreign automakers benefit from India’s scheme without building factories?
No. To avail the 15% concessional duty, automakers must commit to local production and achieve a minimum localization percentage within 3–5 years.
3. How does the U.S. treat EV imports from India or China?
The U.S. imposes a 25% tariff plus other duties and disqualifies many foreign EVs from tax incentives under the IRA, making imports expensive and less attractive.
4. Is the U.K. more open to EV imports than India or the U.S.?
Yes. The U.K. uses moderate 10% tariffs and negotiates bilateral trade deals like the FTA with India to allow specific EV imports under relaxed duties.
5. Will Tesla enter India under the new policy?
Possibly. Tesla has shown interest, but only if it can access duty reductions. That would require local investment, which Tesla hasn’t committed to yet.
6. Are there any incentives for mass-market EVs in India’s new policy?
No. The concessional duty applies only to EVs above $35,000, leaving mass-market segments protected for Indian manufacturers.
7. How do battery origin rules affect EV trade?
India, the U.S., and the U.K. are implementing battery sourcing regulations to reduce reliance on imports from China and strengthen domestic supply chains. These affect eligibility for incentives and tax benefits.
8. What happens if companies don’t meet India’s localization requirements?
They lose the concessional tariff benefit and face standard import duties (100–110%), effectively making their vehicles unviable in the price-sensitive Indian market.
Conclusion
India’s new EV import tariff policy is a calculated effort to strike a balance between protectionism and openness. By offering a conditional window for reduced duties, it invites global players to invest in India while safeguarding the interests of domestic EV manufacturers. In contrast, the U.S. takes a firm protectionist stance, relying heavily on local sourcing and production mandates, while the U.K. offers the most flexible and FTA-friendly approach.
As the global EV industry matures, these differing policy approaches will shape how markets interact, how investments flow, and how consumers gain access to green mobility. Automakers and policymakers alike must navigate this evolving trade landscape with strategic foresight and local adaptation.