India Caps EV Charging Investment for Tariff Relief as Tesla Eyes Market Entry

India's latest EV policy, designed to attract global automakers like Tesla, is set to restrict the extent to which investments in charging infrastructure can be counted towards eligibility for import duty reductions. Under this policy, foreign automakers investing in EV manufacturing will be allowed to import cars at a significantly reduced tariff of 15%, down from the current 100%, provided they commit at least $500 million towards setting up a factory in India.

However, as per the draft rules reviewed by Reuters, the government has imposed a cap on how much of this investment can be allocated to charging infrastructure. Automakers will only be allowed to count up to 5% of their total EV investment towards the creation of charging networks, even if they choose to spend more on this segment. The move aims to ensure that the primary focus of automakers remains on local manufacturing rather than just establishing charging stations.

This policy shift comes at a time when Tesla is making progress towards entering the Indian market, reportedly finalizing two locations for its showrooms. While the reduced import duties have been a major incentive, the restriction on charging network investments could pose challenges for companies seeking to prioritize infrastructure development. Industry experts argue that a robust charging network is critical for EV adoption in India, where range anxiety remains a major deterrent for buyers.

The Indian government’s emphasis on manufacturing is driven by its broader goal of making the country a global EV production hub while reducing dependence on imports. By limiting the investment allocation for charging infrastructure, the government aims to push automakers to ramp up local production and create jobs. An industry source familiar with the discussions stated that the decision reflects New Delhi’s stance that companies should prioritize building vehicles within the country rather than focusing primarily on charging stations.

India’s EV market is still in its early stages, with charging infrastructure remaining a key challenge. Despite government initiatives to promote charging station expansion, their availability remains limited, leading to concerns about the feasibility of rapid EV adoption. Several global automakers, including Tesla, Hyundai, and VinFast, have expressed interest in India’s EV market, but this restriction could influence their investment strategies.

While the policy is expected to boost manufacturing, industry stakeholders argue that a more balanced approach—one that encourages both production and infrastructure—would better support long-term EV adoption. The final rules are yet to be officially announced, but automakers are already weighing their strategies in response to these new limitations.