India’s transition toward clean mobility has accelerated in recent years, driven by an interplay of industrial policy, fiscal incentives, and environmental regulation. The central government’s focus on electric vehicles (EVs) aligns with its long-term goals under Make in India, Atmanirbhar Bharat, and the national commitment to achieve net-zero emissions by 2070.
While public discussion often centres on battery or semiconductor manufacturing, the broader legal architecture governing the manufacture of electric vehicles and their components has evolved into a distinct policy and compliance regime. This write-up analyses the regulatory ecosystem, incentive structures, and emerging legal considerations shaping India’s EV manufacturing landscape.
Regulatory Ecosystem for EV Manufacturing
1. Nodal Authorities
EV and component manufacturing in India is regulated through a multi-ministerial and multi-layered framework:
a. Ministry of Heavy Industries (MHI): The nodal body responsible for EV manufacturing policy and implementation of incentive schemes such as the PLI Scheme and the Scheme to Promote Manufacturing of Electric Passenger Cars.
b. Ministry of Road Transport and Highways (MoRTH): Regulates vehicle standards, safety certification, and type approval under the Central Motor Vehicles Rules, 1989 (“CMVR”).
c. Bureau of Indian Standards (BIS): Specifies technical and quality standards for EV components, including braking systems, connectors, and wiring harnesses under the BIS Act, 2016.
d. Ministry of Environment, Forest and Climate Change (MoEFCC) and State Pollution Control Boards (SPCBs): Oversee environmental impact assessments, emissions norms, and factory-level clearances.
2. Governing Legislations
The manufacture of EVs and related components is guided by a matrix of interrelated legislations:
a. Motor Vehicles Act, 1988 and CMVR, 1989 — governing vehicle design, testing, type approval, and safety requirements.
b. Factories Act, 1948 — ensuring health, safety, and welfare of factory workers.
c. Industries (Development and Regulation) Act, 1951 — regulating industrial licensing and registration.
d. Environment (Protection) Act, 1986 and Environmental Impact Assessment Notification, 2006 — prescribing environmental standards and clearance requirements for industrial establishments.
These legislations together establish the baseline compliance framework for all manufacturers.
3. Type Approval, Certification, and Plant Compliance
Every EV model must undergo type approval and homologation under Rule 126 of the CMVR through authorised testing agencies such as the Automotive Research Association of India (ARAI), International Centre for Automotive Technology (ICAT), or Global Automotive Research Centre (GARC).
Safety-critical components (for example, braking systems or lighting assemblies) require BIS certification before commercial deployment.
Industrial units must also secure factory registration under the Factories Act, 1948 and obtain environmental permissions under the EIA Notification, 2006, along with Consent to Establish and Consent to Operate from respective SPCBs under the Air and Water Acts.
Further, 100 per cent foreign direct investment (FDI) is permitted under the automatic route for EV manufacturing, subject to applicable sectoral caps and environmental approvals. Manufacturers importing prototype or pre-production units may also qualify for customs-duty concessions under the MHI’s EV promotion scheme, provided investment and localisation milestones are met.
This multi-tiered process ensures that industrial establishments are compliant across technical, environmental, and governance dimensions before commercial rollout.
Central Policy Framework and Incentive Mechanisms
1. Scheme to Promote Manufacturing of Electric Passenger Cars in India
Announced in March 2024, this flagship initiative of the Ministry of Heavy Industries is designed to attract global original equipment manufacturers (OEMs) to establish domestic production of electric passenger vehicles.
According to the Press Information Bureau release (PRID 2114919, dated 15 March 2024)[1], the scheme provides customs-duty concessions on a limited number of imported electric cars, tied to stringent investment and localisation conditions. Participating OEMs must:
a. Commit a minimum investment of ₹4,150 crore (USD 500 million);
b. Establish a manufacturing facility in India within three years; and
c. Achieve 50 per cent domestic value addition within five years.
The scheme, administered by MHI, aims to foster sustainable domestic production rather than encourage mere import substitution. It forms part of the National Electric Mobility Mission Plan (NEMMP) and complements broader industrial goals under Make in India and Atmanirbhar Bharat.
2. Production-Linked Incentive (PLI) Scheme for Automobile and Auto Components
The PLI Scheme for Automobile and Auto Components, approved in September 2021[2] with a total outlay of ₹25,938 crore, offers graded incentives on incremental sales of advanced automotive technology (AAT) products, including EVs and high-value components such as drivetrains, power electronics, and hydrogen-fuel subsystems.
The scheme rewards manufacturers achieving localisation and export milestones, thereby encouraging global competitiveness. Administered by MHI, it incentivises both OEMs and component manufacturers on actual sales performance rather than investment commitments alone, ensuring accountability and long-term industrial participation.
Together, the PLI Scheme and the MHI’s dedicated passenger-car manufacturing initiative form the dual pillars of India’s central incentive architecture for EV production.
3. Complementary Policy Framework
Other national programmes reinforcing EV manufacturing include:
a. FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles)[3] — promoting demand creation, charging infrastructure, and supply-chain strengthening.
b. Make in India and Atmanirbhar Bharat — encouraging technology transfer, domestic manufacturing, and reduced import dependence.
These central policies collectively enable manufacturers to integrate fiscal benefits with strategic localisation and compliance commitments.
State Level Incentive
1. Policy Landscape
State governments have established comprehensive EV policies to supplement central initiatives and attract industrial investment.
a. Tamil Nadu EV Policy 2023[4] offers capital subsidies up to 30 per cent of fixed-asset investment, SGST reimbursement, and single-window clearances.
b. Gujarat EV Policy 2021[5] provides capital subsidies, interest subsidies, and exemptions from electricity duty.
c. Maharashtra EV Policy 2021[6] extends land-lease concessions, power-tariff incentives, and R&D grants.
d. Telangana EV Policy 2020[7] and Karnataka EV Policy 2017[6] create dedicated EV clusters and offer tax and infrastructure incentives.
2. Alignment with Central Schemes
Most states have harmonised their policies with central initiatives like the PLI and MHI schemes. Manufacturers can combine state-level benefits with central incentives, optimising overall capital and compliance costs. Several states have also implemented green channel approvals and single-window systems to streamline environmental, labour, and utility permissions, reducing procedural bottlenecks for new manufacturing entrants.
Environmental and Sustainability Compliance
Although EV manufacturing aims to reduce emissions at the consumer level, production facilities are subject to comprehensive environmental obligations.
Plants must adhere to the Environment (Protection) Act, 1986 and MoRTH’s notified emission and noise standards. Electronic sub-assemblies, such as controllers and sensors, fall under the E-Waste (Management) Rules, 2022, mandating extended producer responsibility.
The Bureau of Energy Efficiency (BEE) enforces efficiency standards under the Energy Conservation Act, 2001, while several states incentivise compliance through concessional tariffs and fast-track approvals for green-certified facilities.
Such measures integrate environmental sustainability directly into the manufacturing policy framework.
Emerging Legal Consideration
India’s EV regulatory regime is evolving beyond industrial licensing into areas of governance, data, and global alignment:
a. Localisation Mandates under the Phased Manufacturing Programme (PMP) are deepening domestic value chains.
b. Technology-Transfer and IP Contracts are critical in joint ventures involving foreign OEMs, necessitating precise clauses on ownership and licensing.
c. Global Standards Harmonisation with UNECE and ISO is expanding export readiness.
d. Data Governance for connected vehicles under the Digital Personal Data Protection Act, 2023 introduces a new compliance dimension.
e. ESG Reporting and Labour Compliance are emerging as investor-driven expectations in large industrial projects.
Conclusion
India’s EV manufacturing regime represents a convergence of policy incentive and regulatory discipline. The Scheme to Promote Manufacturing of Electric Passenger Cars and the PLI Scheme for Automobile and Auto Components provide fiscal momentum, while the CMVR, BIS framework, and environmental statutes ensure technical and sustainability compliance.
For automakers and component manufacturers, competitiveness depends on proactive adherence to localisation, certification, and environmental standards. As India strengthens its position in the global EV value chain, regulatory foresight will remain central to building a resilient and credible manufacturing ecosystem.
[1] Press Information Bureau, “Cabinet Approves the Scheme to Promote Manufacturing of Electric Passenger Cars in India,” PRID 2114919 (March 2024).
[2] https://heavyindustries.gov.in/pli-scheme-automobile-and-auto-component-industry
[3] https://heavyindustries.gov.in/fame-ii
[4] https://spc.tn.gov.in/policy/electric-vehicles-policy-2023/
[6] https://www.midcindia.org/wp-content/uploads/2021/09/E-Vehicle-GR-_Eng_22_July-updated.pdf
[7] https://www.nsws.gov.in/s3fs/2021-08/Telangana%20EV%20policy.pdf
[8] https://evyatra.beeindia.gov.in/wp-content/uploads/2022/11/Karnataka_EV_Policy_20170925.pdf