The government of India wants to develop an EV ecosystem for premium Electric Vehicles. Last year, the Indian government encouraged investment in manufacturing of premium EVs at the local level through the scheme known as Scheme for Manufacturing Electric Car (SMEC). The SMEC was announced on 15th March, 2024.

To support this goal, the government wants to invest in research and development (R&D). It also wants to provide funds for establishment of separate specialized production lines particularly for EVs in the midst of existing factories. It helps to streamline production of EVs and also does not disturb production of other vehicles. The official guidelines regarding the schemes will be announced soon.

About the SMEC scheme
The main goal of the scheme was to uplift the investment in production of premium Electric cars at local level. It is to promote manufacturing at the local level. The scheme gives import relaxation of about 15 percent for a duration of 5 years. The automakers can import EV vehicles of minimum worth, freight cost and insurance of $ 35,000 with benefit of this reduced import duty. However, the automakers have to make an investment of at least 500 million dollars to establish local production of EVs in order to obtain this benefit of import duty relaxation to 15 percent.

Discussion with Auto Industry stakeholders
This resolution of focus on R&D and separate production lines for EVs was taken after the meeting with auto industry shareholders in the previous week. The meeting was at the final round and the government decided to take an approach of investment in R&D as well as creation of separate specialized production lines for EVs in the existing production facilities.

Apart from this, companies are permitted to make an investment of about 500 million dollars in the new construction projects for EVs. The auto makers are supposed to make an investment in duration of three years from the date of approval under the SMEC. Only after following this criteria, the company can benefit from lower import duties. The requirement for investments in Research and Development is similar to the existing requirements of the Auto production-linked incentive (PLI) scheme.

The recent meeting was not attended by Vin Fast and Tesla. Despite this, several automakers such as Toyota, Škoda-VW, Hyundai, and Mercedes Benz India showcased liking for the scheme.

These interested automakers are quite worried about the amount of investment required for creation of specialized production lines for Electric Vehicles only. To make a big investment of amounts such as Rs. 4,000 crore, there should be a large-scale operation to make the project practical and successful. Automakers believe that investments in research and development will promote creation of advanced technology in Electric vehicles.

The reason for worries about the investment amount is due to 89,000 Electric vehicles being sold in India in the year 2023. The worth of these Electric vehicles were higher than Rs. 25 lakhs. This makes it difficult for local companies to make a large amount of investments. In midst of increasing disposable income levels of population and expansion of the Indian economy, the sales growth of Electric Vehicles is projected to hike at a quicker pace.

In conclusion, the Indian government aims to make sure that rising demand for Electric vehicles is fulfilled by local automakers only. The government also wants to build a favourable environment for production of advanced technologies and premium EV cars. To achieve these goals, it has implemented schemes like SMEC.