India may revise its incentive framework for electric passenger car manufacturing, as the proposed free trade agreement (FTA) with the European Union (EU) is expected to provide tariff reductions on fully built and semi-knocked-down electric vehicles, according to people familiar with the matter.

Officials are assessing possible changes to the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), which currently relies largely on import duty concessions. The review includes the possible introduction of more direct incentives to encourage global electric vehicle manufacturers to establish production facilities in the country, the people said.

"SPMEPCI will need to change after the India-EU FTA," a senior official told a local daily, adding that the government has not yet received any applications under the scheme.

Global automakers have cited the ongoing India-EU FTA negotiations, as well as China's restrictions on rare earth magnet exports, as reasons for not participating in SPMEPCI, minister of state for heavy industries Bhupathiraju Srinivasa Varma informed the Lok Sabha last month.

India and the EU continue negotiations on the proposed FTA.

Automakers have conveyed that a decision on joining SPMEPCI may be taken after the India-EU FTA is finalised. Sector observers have noted that committing to investment under the scheme solely to access concessional import duty benefits may not be viable, as a potential FTA could provide similar tariff relief without requiring a capital expenditure commitment.

In addition, automakers have highlighted that the investment threshold requirements and stipulated timelines under the scheme may present challenges, Varma said at the time.

The Centre approved SPMEPCI in March 2024 and subsequently conducted several rounds of discussions with potential participants. Scheme guidelines were approved in June 2025, after which the application window was opened until October, but no applications were received.

This was despite the Centre writing to the embassies of countries with established automotive industries, encouraging participation in the scheme. Invitations were extended to Vietnam, Germany, the Czech Republic, the UK and the US, officials said.

Under SPMEPCI, companies are permitted to import completely built-up units of electric four-wheelers with a minimum import value of US$ 35,000 at a reduced customs duty rate of 15 per cent for a period of five years.