Image source: economictimes.com
India-EU FTA and EV Scheme Delay: Main Points
- The government started a big plan to help make electric cars in India, but no companies joined by the October 21 deadline.
- Car makers say they need to know what will happen with the India-EU free trade agreement (FTA) before they decide.
- The plan gives a low import tax of 15 percent for five years on ready-made electric cars if companies build factories in India.
- Companies must spend at least ₹4,150 crore and use 25 percent Indian parts in three years, then 50 percent in five years.
- Three big worries: FTA rules on taxes, getting rare earth magnets for batteries, and high costs with tight time limits.
- Car makers like Tata, Mahindra, and Hyundai talked to the government and said they will decide after the FTA is final.
- Goal of the plan: Make India a top place to build electric cars and sell them worldwide.
- India wants 30 percent of new cars to be electric by 2030, but charging stations and cheap batteries are still problems.
Car Makers Hold Back on India’s Electric Vehicle Plan: They Wait for India-EU Trade Deal Rules
India wants to become a big player in making electric cars. The government started a special program to help companies build factories here. But the plan did not get any takers by the deadline of October 21, 2025. The Ministry of Heavy Industries told Parliament why. Many car companies are waiting for news on the India-EU free trade agreement (FTA). This deal could change how easy it is to bring parts and cars from Europe.
The program is called the scheme to promote the manufacturing of electric passenger cars in India. It aims to make India a strong hub for electric vehicles. Companies that join get a low customs tax of 15 percent for five years on importing fully built electric cars. But they must set up a factory in India. They also need to invest at least ₹4,150 crore. In three years, 25 percent of the car’s parts must come from India. This goes up to 50 percent in five years.
Car makers did not apply because of three main problems. First, they do not know the final rules of the India-EU FTA. This deal talks about taxes on imports and exports. Second, they worry about getting rare earth magnets. These are key for EV batteries, but rules make it hard to source them locally. Third, the investment is too high, and the time to meet the rules is too short.
The ministry said companies like Tata Motors, Mahindra, and Hyundai talked in meetings. They said they will decide to join only after the FTA is clear. The FTA will tell them about tariffs, how to get technology, and supply chain rules.
Why This Plan Matters for India’s Electric Car Dream
India sold more than 2 million electric vehicles in 2025. This is a big jump from last year. But petrol and diesel cars still rule the roads. The government wants 30 percent of new cars to be electric by 2030. To make this happen, India needs factories that make EVs here. Right now, many EVs are imported or made with foreign parts. This makes them expensive.
The program would help. Low import tax lets companies start selling while building factories. The local parts rule would create jobs and bring technology to India. But without clear FTA rules, companies are afraid to spend billions.
What the India-EU FTA Could Change
The FTA talks have been going on for years. If signed, it will lower taxes between India and Europe. This could make it easier to bring EV parts from companies like Volkswagen or Renault. But carmakers worry it might hurt local factories. They want to know if the FTA will have special rules for electric cars.
Rare earth magnets are another big issue. These are used in EV motors. China makes 90 percent of the world’s supply. India has beach sand with these metals, but processing is hard. The FTA might help get better supply from Europe or Australia.
Car Makers’ Point of View
Big companies like Tata and Mahindra lead India’s EV market. Tata has a 40 percent share. They make popular models like the Nexon EV and Punch EV. Mahindra has BE 6 and XUV400. But Chinese brands like BYD and MG are growing fast.
These companies say the program is good, but they need more time and clarity. A high investment of ₹4,150 crore is risky without FTA details. Tight deadlines for local parts also scare them. They want the government to extend the deadline and give more support.
India’s EV Journey and the Road Ahead
India’s electric car sales grew 87 percent in 2025. Two-wheelers lead with 1.2 million units. Cars and SUVs sold 156,000 units, up 57 percent. But charging stations are only 30,000. This is not enough for highways.
The government has plans like FAME-III subsidies to help. But without factories and clear rules, EVs will stay expensive. The FTA could be the key. If it opens doors for cheap parts, more companies will join the program.
India has the talent and market to lead EVs. But it must solve these problems fast. A good FTA and flexible scheme could make the 2030’s 30 percent goal real.
Source: telegraphindia.com
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