The second phase of India’s scheme to promote electric vehicle manufacturing could face delays as the country remains engaged in free trade agreement (FTA) negotiations with the European Union, Hanif Qureshi, IPS, Additional Secretary at the Ministry of Heavy Industries, revealed at the India EV Conclave on Tuesday.
Speaking at the two-day event at Hyatt Regency Delhi, Qureshi acknowledged that “there could be a delay as India is still in the midst of FTA negotiations with the EU,” highlighting the complex interplay between trade policy and domestic industrial strategy. He emphasized that while “FTAs are helpful, we should also look at domestic conditions,” indicating the government’s cautious approach to ensuring that trade agreements don’t undermine domestic manufacturing interests.
The India-EU FTA negotiations, which resumed in 2021 after being abandoned in 2013, have gained fresh urgency following the United Kingdom’s successful conclusion of an FTA with India in May 2025. The 14th round of negotiations concluded in Brussels in October, with both sides targeting a deal by the end of 2025. The automotive sector represents one of the most contentious areas in the negotiations, with the EU proposing zero tariffs on its cars while India is reportedly considering reducing customs duty on EU-built vehicles from over 100% to as low as 10% in a phased manner.
These negotiations directly impact India’s EV manufacturing scheme, officially known as the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), which was notified in March 2024. The scheme offers reduced import duties to global EV manufacturers in exchange for significant investments in domestic manufacturing. Under SPMEPCI, companies can import up to 8,000 electric vehicles annually at a reduced customs duty of 15%, compared to the existing 70-100%, provided they commit to investing at least ₹4,150 crore (approximately $500 million) within three years.
The scheme requires manufacturers to achieve 50% Domestic Value Addition (DVA) within five years and targets companies with significant global automotive operations rather than startups. It’s designed to attract established international manufacturers like Tesla, VinFast, and major European automakers.
Qureshi’s comments suggest that the government is carefully balancing multiple objectives: attracting foreign EV manufacturers through the SPMEPCI scheme while simultaneously negotiating broader tariff reductions with the EU that could impact the scheme’s attractiveness and India’s automotive strategy. The challenge lies in structuring the second phase of the scheme in a way that complements rather than conflicts with commitments India might make in the EU FTA. Any tariff reductions agreed with the EU would need to be reconciled with the temporary duty relief offered under SPMEPCI.
European luxury brands including Mercedes-Benz, Audi, BMW, and Porsche stand to benefit significantly from any tariff reduction. Currently, steep customs duties make EU-built vehicles significantly more expensive in India. For instance, a Porsche Taycan that retails at €102,600 in Germany carries a price tag of approximately €177,500 in India—73% more. Tesla, while not European, has also shown interest in the Indian market and could leverage both the SPMEPCI scheme and potential EU FTA benefits given its manufacturing presence in Europe.
Domestic manufacturers including Tata Motors, Mahindra & Mahindra, and Maruti Suzuki have concerns about increased competition from globally popular EVs. The government’s phased approach to tariff reductions appears designed to shield these companies while building domestic manufacturing capacity. Industry observers note that the delay in the second phase of SPMEPCI could actually provide Indian manufacturers more time to strengthen their positions before facing intensified foreign competition.
The interplay between the EV scheme and EU FTA reflects India’s broader strategic calculus in positioning itself within global supply chains. Following the UK’s FTA with India, European businesses face competitive pressure to secure market access before losing ground to UK firms. From India’s perspective, the government seeks to leverage this urgency to negotiate favorable terms while ensuring that any deal supports the ‘Make in India’ initiative and doesn’t merely transform the country into an import market.
With the EU FTA negotiations targeting a year-end 2025 conclusion, the second phase of SPMEPCI is unlikely to be finalized until the trade deal’s contours become clearer. This could push the scheme’s expansion into 2026 or later. However, the first phase of SPMEPCI remains operational, and companies can still apply for benefits under current guidelines. The application window was scheduled to open in June 2025, with the Ministry retaining the right to reopen it until March 15, 2026.
Qureshi emphasized that despite the potential delay, the government remains committed to promoting the EV ecosystem and manufacturing across segments. The pause in the second phase may allow policymakers to better align the scheme with India’s evolving trade architecture. “We are still in the midst of FTA negotiations with EU, so the second phase may take some time,” Qureshi reiterated, suggesting that clarity on timing would emerge once trade talks progress further.
The India EV Conclave, which brings together over 35 expert speakers and 300+ industry stakeholders, continues on Wednesday with discussions on charging infrastructure, battery innovation, and supply chain resilience in India’s electric mobility transition.