EV & Battery Manufacturing: PLI, FAME III

India's EV Revolution: The Manufacturing Opportunity

India's electric vehicle market crossed a major milestone in 2025: total EV sales surpassed 22.7 lakh units (2.27 million), with EVs capturing 8% of all automobile sales. Electric car sales alone hit 176,500 units, growing 77% year-over-year. The India EV market is valued at approximately US$18.79 billion in 2025, with projections pointing to US$31+ billion by 2026, driven by a CAGR exceeding 50%.

For foreign manufacturers and investors, this growth trajectory is underpinned by one of the most aggressive government incentive architectures in the world. India has deployed over INR 44,000 crore (US$5+ billion) across multiple production-linked incentive schemes, demand subsidies, and infrastructure funding programs targeting the EV and battery manufacturing ecosystem.

This guide covers every major scheme, their current status, and practical guidance on how foreign companies can participate through FDI in India's EV manufacturing sector.

PLI Scheme for Advanced Chemistry Cells (ACC): The Battery Backbone

The National Programme on Advanced Chemistry Cell (ACC) Battery Storage is India's flagship scheme to build domestic battery manufacturing capacity and reduce dependence on Chinese imports for lithium-ion cells.

Scheme Overview

Approved Beneficiaries

Four companies were originally selected through competitive bidding, with 50 GWh allocated across them:

Reality Check: Implementation Progress

As of October 2025, only 2.8% (1.4 GWh) of the targeted 50 GWh capacity has been commissioned, entirely by Ola Electric. No incentives beyond Ola's INR 73.7 crore had been disbursed against the targeted INR 29 billion (US$332 million). All Round 1 beneficiaries sought deadline extensions in May 2025, citing delays in sourcing equipment from China.

This implementation gap represents both a challenge and an opportunity. Foreign battery manufacturers with proven technology and supply chain access could find India's incentive framework attractive if additional capacity rounds are announced.

Key Requirements for Beneficiaries

• Domestic value addition: Minimum 25% at start, rising to 60% within 5 years
• Mandatory investment: INR 225 crore per GWh of committed capacity within 2 years
• Technology requirements: Must produce cells meeting minimum energy density specifications
• Incentive disbursement: Over 5 years from commissioning of the manufacturing facility

PLI Scheme for Automobile and Auto Components

Alongside the ACC battery scheme, India runs a separate PLI scheme specifically for automobile and auto component manufacturing, with significant coverage of EV components.

Scheme Details

EV-Specific Incentive Rates

The scheme offers differentiated incentive rates based on component criticality for the EV transition:

• 25% incentive: Battery cell manufacturing (most import-intensive)
• 18% incentive: Advanced automotive components including electric motors, motor controllers, sensors, semiconductors, and power electronics
• Standard rates: Other auto components as per the scheme schedule

State-Level Manufacturing Concentration

The 278 approved manufacturing units are concentrated in key industrial states:

• Maharashtra: 85 units (leading)
• Tamil Nadu: 49 units
• Haryana: 43 units
• Karnataka: 29 units

Foreign companies evaluating manufacturing locations should consider these clusters for supply chain proximity and infrastructure availability.

PM E-DRIVE: The Successor to FAME

India's demand-side incentive architecture for EVs has evolved through several phases: FAME-I (2015-2019), FAME-II (2019-2024), the interim Electric Mobility Promotion Scheme (EMPS, April-September 2024), and now PM E-DRIVE, launched on October 1, 2024.

PM E-DRIVE Overview

Demand Incentive Structure

PM E-DRIVE allocates INR 3,679 crore for demand-side subsidies:

Charging Infrastructure

INR 2,000 crore is allocated for EV Public Charging Stations (PCS), targeting:

• 22,100 fast chargers for electric 4-wheelers
• 1,800 fast chargers for e-buses
• 48,400 fast chargers for e-2W/3Ws

The e-voucher system introduced under PM E-DRIVE uses Aadhaar-authenticated digital vouchers at the point of purchase, replacing the earlier dealer-claim model that caused payment delays under FAME-II.

Note on "FAME III"

While the industry commonly refers to PM E-DRIVE as the successor to FAME-II, a formally designated "FAME III" scheme has not been launched. The government replaced the FAME framework with PM E-DRIVE and the EMPS interim scheme. Investors searching for "FAME III" should direct their attention to PM E-DRIVE and its specific incentive structures.

India's EV Market by Segment: Where the Demand Is

Understanding the demand landscape is critical for manufacturers planning production capacity and product mix. India's EV market has a unique composition compared to Western markets:

Electric Two-Wheelers (Dominant Segment)

Electric two-wheelers accounted for 12,79,951 units in 2025, capturing the largest segment share with 11.4% growth over 2024. This segment is driven by urban commuters seeking fuel cost savings, last-mile delivery fleets, and state-level subsidies that make e-2Ws price-competitive with petrol scooters. Key manufacturers include Ola Electric, TVS Motor, Bajaj Auto, and Ather Energy. Battery requirements are typically 1.5-4 kWh per vehicle, creating massive demand for smaller lithium-ion packs.

Electric Four-Wheelers (Fastest Growing)

176,560 electric cars were registered in 2025, a 76.9% year-over-year surge. Tata Motors dominates with over 60% market share through the Nexon EV and Tiago EV models. The entry of Maruti Suzuki's eVitara in 2026 is expected to significantly expand the addressable market. Battery packs for e-4Ws range from 25-80 kWh, representing the highest value per unit for cell manufacturers.

Electric Three-Wheelers

E-rickshaws and electric cargo three-wheelers represent a high-volume, price-sensitive segment. These vehicles typically use smaller 3-5 kWh battery packs, often with lower-cost lead-acid or LFP (lithium iron phosphate) chemistries. The segment is particularly strong in north Indian cities and represents an entry point for battery manufacturers targeting cost-optimized products.

Electric Buses

State transport undertakings are deploying electric buses under PM E-DRIVE, with 14,028 units targeted. Each e-bus requires 150-350 kWh of battery capacity, making this segment a major driver of cell demand despite lower unit volumes. Cities including Delhi, Mumbai, Bengaluru, Kolkata, and Hyderabad are leading e-bus adoption.

Critical Mineral Sourcing and Supply Chain

Battery manufacturing depends on reliable access to critical minerals, and India's strategy to secure these supply chains has direct implications for manufacturing investors.

India's Critical Mineral Challenge

India imports virtually 100% of its lithium, cobalt, and nickel requirements for battery manufacturing. The government has taken several steps to address this dependency:

• KABIL (Khanij Bidesh India Limited): A joint venture of NALCO, HCL, and MECL established to acquire overseas critical mineral assets. KABIL has signed agreements for lithium exploration in Argentina, Chile, and Australia.
• Domestic lithium discovery: The Geological Survey of India identified lithium reserves in Jammu & Kashmir's Reasi district (estimated 5.9 million tonnes of ore) and Rajasthan's Degana, though commercial extraction timelines remain uncertain.
• Customs duty concessions: Reduced or zero customs duty on lithium-ion cells, battery packs, and critical minerals imported for EV manufacturing

Supply Chain Considerations for Foreign Manufacturers

Foreign battery manufacturers entering India should plan for:

• Cathode material sourcing: Limited domestic production of NMC (nickel-manganese-cobalt) or NCA cathode materials. Most manufacturers import from China, South Korea, or Japan. Setting up cathode processing in India could qualify for additional PLI incentives under the domestic value addition requirements.
• Anode material: Synthetic graphite is available domestically from companies like Himadri Speciality Chemical, but high-grade anode materials are largely imported.
• Electrolyte and separator: Almost entirely imported. Domestic electrolyte production is being explored by several startups but remains pre-commercial.
• Recycling infrastructure: India's battery recycling ecosystem is nascent. Companies like Lohum Cleantech and Attero are building recycling capacity, but policy frameworks for end-of-life battery management are still evolving.

The domestic value addition requirement of the PLI ACC scheme (25% initially, rising to 60% in 5 years) means manufacturers must progressively localize their supply chains. This creates opportunities for upstream component manufacturers to co-locate with gigafactories in India.

FDI Policy for EV and Battery Manufacturing

India's FDI policy is highly favourable for EV and battery manufacturing:

• 100% FDI under automatic route: No government approval required for foreign investment in manufacturing, including EV and battery manufacturing
• No sectoral caps: Foreign investors can hold 100% equity in an Indian manufacturing entity
• Entity options: Private limited company (most common), wholly-owned subsidiary, or joint venture

Steps for Foreign EV Manufacturers to Enter India

1. Incorporate an Indian entity: File SPICe+ with MCA for company incorporation (7-15 working days)
2. Bring in capital: Remit FDI through authorized dealer bank; file FC-GPR within 30 days of share allotment
3. Apply for PLI scheme: If additional rounds are announced, submit application with proposed capacity, investment plan, and technology credentials
4. Obtain manufacturing licenses: Factory license, environmental clearance, fire safety NOC, and BIS certification for battery products
5. Set up supply chain: Register for IEC for importing raw materials (lithium, cobalt, nickel) and components
6. File for GST registration: Required for all manufacturing and sales activities

Tax Benefits for EV Manufacturers

• Corporate tax: The concessional corporate tax rate of 15% (effective ~17.16%) under Section 115BAB was available only to new manufacturing companies that commenced production by March 31, 2024. That window has closed and was not extended. New manufacturers incorporated now default to the Section 115BAA rate of 22% (effective ~25.17%).
• GST on EVs: Reduced rate of 5% (compared to 18% for small ICE cars and 40% for large/luxury ICE vehicles under GST 2.0, effective 22 Sep 2025)
• Customs duty benefits: Concessional duty on lithium-ion cells and battery packs imported for EV manufacturing

State-Level Incentives for EV Manufacturing

Several Indian states offer additional incentives that stack on top of central government schemes:

For detailed state-level manufacturing comparisons, investors should evaluate land costs, labour availability, port proximity, and supply chain density alongside incentive packages.

Gigafactory Status and Investment Landscape (2025-2026)

India's gigafactory buildout is behind schedule but gaining momentum. The current investment landscape includes:

Active Projects

• Ola Electric Gigafactory (Tamil Nadu): India's first operational cell manufacturing facility. Phase 1a (1.4 GWh) commissioned. INR 73.7 crore incentive received in March 2025. Full 5 GWh targeted by FY 2029.
• Reliance New Energy (Gujarat): 40 GWh gigafactory under construction. Expected to begin operations in 2026. Technology partnership with international cell chemistry providers.
• Amara Raja (Telangana): 16 GWh facility being built with Gotion High-Tech (China) technology. First production expected 2027.

Total Investment Mobilized

The PLI scheme for automobile and battery manufacturing has attracted investments worth INR 1,75,311 crore across automotive and battery manufacturing segments, with more than 95 automotive firms and 4 giga-factory consortia approved.

Opportunity for Foreign Entrants

Given the implementation delays and capacity gaps, India may announce additional PLI rounds for battery manufacturing. Foreign companies with proven cell chemistry, established supply chains for cathode/anode materials, or differentiated battery technologies (sodium-ion, solid-state) are well-positioned to participate. The government has signalled openness to expanding the beneficiary pool, particularly for companies that can accelerate domestic value addition.

EV Component Manufacturing: Beyond Cells

The EV manufacturing ecosystem extends well beyond battery cells. Several high-value component categories offer strong manufacturing opportunities under the auto PLI scheme:

• Electric motors and drivetrains: INR 18% incentive under PLI auto scheme
• Power electronics (inverters, converters, BMS): 18% incentive; high import dependence creates strong domestic demand
• Charging equipment: Growing demand from PM E-DRIVE's 72,300 fast charger target
• Thermal management systems: Critical for battery longevity in India's climate; limited domestic supply
• Wiring harnesses and connectors: Existing auto component base in India provides ready infrastructure

India's existing strength in auto component manufacturing, with 278 PLI-approved units across 17 states, provides a ready ecosystem for EV component entrants. Companies evaluating India vs. China for manufacturing should consider India's lower labour costs, English-speaking workforce, and democratic governance stability alongside China's more mature EV supply chain.

Special Economic Zones and Industrial Parks for EV Manufacturing

Beyond state-level incentives, locating in a Special Economic Zone (SEZ) or dedicated industrial park offers additional advantages for EV manufacturers:

SEZ Benefits

• Tax holiday: 100% tax exemption on export profits for the first 5 years, 50% for the next 5 years, and 50% of ploughed-back profits for an additional 5 years
• Duty-free imports: No customs duty on raw materials, capital goods, and consumables imported for manufacturing
• Single-window clearance: Simplified regulatory approvals through the SEZ Development Commissioner
• Infrastructure: Ready-built factory shells, reliable power supply, water treatment facilities, and logistics connectivity

Key Industrial Parks for EV Manufacturing

• DHOLERA SIR (Gujarat): India's first greenfield industrial smart city, with dedicated plots for EV and battery manufacturing. Excellent port connectivity to Mundra and Pipavav.
• SIPCOT Hosur (Tamil Nadu): Proximity to Bengaluru's automotive ecosystem. Ola Electric's gigafactory is located here.
• Aurangabad Industrial City (Maharashtra): Part of the Delhi-Mumbai Industrial Corridor with planned EV component cluster.
• Tumkur EV Cluster (Karnataka): State-designated EV manufacturing zone with fast-track approvals and infrastructure.

For companies entering India specifically for EV manufacturing, SEZs offer a compelling combination of tax savings and operational simplicity. However, SEZ units must export 100% of production or obtain specific authorization for domestic tariff area (DTA) sales, which involves paying applicable customs duties on DTA clearances. Companies targeting the domestic Indian market should carefully evaluate whether an SEZ or a non-SEZ industrial park better suits their business model.

Regulatory and Compliance Framework

EV and battery manufacturing in India requires navigation of multiple regulatory approvals:

Central Approvals

• BIS certification: Bureau of Indian Standards certification mandatory for battery cells, packs, and EV components sold in India
• CMVR Type Approval: Central Motor Vehicle Rules type approval for complete vehicles
• Environmental clearance: Required for manufacturing facilities above threshold capacity
• Factory license: Under the Factories Act, 1948

Ongoing Compliance

• Annual compliance: ROC filings (AOC-4, MGT-7), board meetings, statutory audit
• GST compliance: Monthly returns for manufacturing entities
• Transfer pricing: Required if transacting with parent/associated enterprises
• FLA return: Annual filing with RBI for entities with FDI
• PLI scheme compliance: Quarterly production and sales reporting, annual audit of eligible sales

Practical Investment Considerations for Foreign Manufacturers

While the incentive framework is substantial, foreign manufacturers should approach India's EV opportunity with a clear-eyed assessment of practical realities.

Realistic Timeline for Market Entry

The end-to-end timeline from initial decision to commercial production is typically 24-36 months for a greenfield battery or EV component manufacturing facility. This can be reduced to 12-18 months by leasing space in existing industrial parks with pre-approved clearances.

Capital Requirements

Investors should budget for the following capital outlay, in addition to the PLI scheme's mandatory investment of INR 225 crore per GWh:

• Land and construction: INR 50-200 crore depending on location and facility size
• Equipment and machinery: INR 100-500 crore for cell manufacturing lines (imported from China, South Korea, or Japan)
• Working capital: 3-6 months of raw material inventory, particularly for critical minerals with long lead times
• Compliance and certification: INR 1-5 crore for BIS testing, environmental clearance, factory setup compliance

Workforce Availability

India has a large pool of engineering graduates but limited specific experience in battery cell manufacturing. Companies typically plan for:

• Hiring Indian engineers with semiconductor, chemical, or electrochemical backgrounds
• Training programs with overseas facilities (6-12 months) for core production team
• Partnerships with IITs and NITs for research and talent pipeline development
• Competitive salaries for experienced battery engineers, who command premiums of 30-50% over standard manufacturing roles

For hiring guidance, companies can leverage an Employer of Record for initial R&D teams before the manufacturing facility is operational, then transition to direct employment once the subsidiary is fully established. The EOR vs. PEO vs. contractor comparison helps determine the right model for early-stage hiring.

Key Takeaways

• India's EV market exceeded 2.27 million units in 2025 (8% market share), with electric cars growing 77% year-over-year
• Over INR 44,000 crore in government incentives span battery manufacturing (PLI ACC: INR 18,100 crore), auto components (PLI Auto: INR 25,938 crore), and demand subsidies (PM E-DRIVE: INR 10,900 crore)
• Battery manufacturing is significantly behind target (2.8% of 50 GWh commissioned), creating opportunity for credible foreign entrants with proven technology
• 100% FDI is allowed under the automatic route for all EV and battery manufacturing; the 15% concessional tax rate (s.115BAB) closed to new entrants on March 31, 2024, so new manufacturers now use the 22% rate (s.115BAA, effective ~25.17%)
• PM E-DRIVE replaced the FAME framework in October 2024 with INR 10,900 crore over 2 years, covering 2W, 3W, trucks, buses, ambulances, and 72,300+ charging stations
• State-level incentives stack on top of central schemes, with Gujarat, Tamil Nadu, Maharashtra, Karnataka, and Telangana offering the most aggressive packages