The global demand for EVs (electric vehicles) has increased significantly in past years as people are shifting more to low-carbon emission vehicles and sustainable growth. In India people are shifting their demand for electric vehicles, see as a future mode of transport. The market share of electric vehicles in India is experiencing rapid growth and the set objective is to elevate the proportion of electric vehicle sales to 30% in private cars, 70% in commercial vehicles, 80% in two-wheelers, and 40% in buses by the year of 2030. In 2024 sales of electric vehicles in India surged by 20.88% to 1.39 million units which shows the shifting trend towards electric vehicles in the country and it is projected to surge from $16.77 billion to $27.70 billion by 2028.

In India, major players such as Mahindra&Mahindra, TATA Motors, and Hyundai are already serving customers its eclectic vehicles in the market. Meanwhile, on Friday the shares of major players in the market fell from 2-6% amid of new government policy for electric vehicles to facilitate entry of new global players in the market and also relaxation in electric vehicles import rules. These reliefs in duty could attract leading global players in market. The change or potential shift in policy to attract foreign players in the domestic market indicates India's willingness to increase its presence in the global supply chain.

What is the New EV policy?

On Feb.1 in the union budget finance minister announced to cut of basic custom duty on cars priced $40,000 (₨35, 00,000) or higher to 70% from 125% on completely built-up cars in India. The purpose of the new policy is to reduce import duty on electric cars to 15%. The new electric vehicle policy will allow companies to set up assembly operations in existing factory premises meanwhile the required investment of $500 million must come from new capital excluding past investments and costs related to land & building. Those companies who meet these qualifications will enjoy reduced import duties of 15% which is lower than 110% currently.

To avail of these import benefits companies will have 120 days to apply, in new policy allows annual imports of up to 8,000 premium vehicles whose price should be above $35000 at reduced duties. Companies who are applying it are obligated to establish operational manufacturing facilities within three years and achieve 25% domestic value initially and increase 50% within five years of ministry approval. In the new policy for electric vehicles progressive turnover target outline is ₨2500 cr for the second year, ₨5000 cr for the fourth year, and ₨ 7,500 cr for the fifth year from the start of manufacturing.

In this, if the process remains on path letter of approval can be issued by July-August which allows imports to begin after it. Big players like Hyundai and Volkswagen have shown their interest in government discussion but global player Tesla is in the limelight and is considered a key beneficiary of these new rules has yet to engage with the government. US car makers are planning to enter in Indian market in April 2025 with cheaper price models to disrupt the electric car market.

Tesla Entrance in Indian Market

Recently on 18, Feb Tesla listed 13 jobs opening in India and offered sales & service operations in Delhi and Mumbai and Tesla is likely to start its retail operations in the domestic market from the second half of 2025. The Indian government and Tesla have been working to enter Musk in the domestic market. Domestic players remain confident in his strength of made-in-India products but all declined after news of Tesla's entry into the market. In starting Musk's plan to import its electric vehicles from Germany, Berlin plant at 110% tariffs impost, these vehicles which are sold in the domestic market fall under the luxury segment. But new policy introduced by the government allows manufacturing companies to set up assembly facilities at existing plants by reducing import duty from 15% and other benefits in India. Tesla's entry into the domestic market could disrupt the demand for electric vehicles as Tesla is known for its top-class security features and another facility in its vehicles. Tesla's entry increases the competition in the market which will benefit customers in multiple options for electric vehicle cars at reasonable prices.

Change in Price of Share in Major Companies

Impact of New EV policy on Market

Automotive Stocks

The news impact of Tesla's entry into the market has disrupted market sentiments but domestic players Mahindra& Mahindra stated the limited impact of Tesla's entry. In the automotive market, Tesla stock is likely to be positive as Tesla is planning to localize production in the Indian market. After Tesla's entry investors would likely see more growth in the automotive sector as the EV market is growing fast. Major Players in the domestic market who already catering to customers in the EV segment, Tesla's entry could lead to competitive pressure. On the other side, domestic companies might also see an increase in price if the Tesla car is not according to the Indian customer price range.

EV related Stocks

The electric vehicle market is growing rapidly, this will also surge the demand for related products in stocks of battery manufacturers, charging infrastructure, and raw material suppliers. The stock price of related companies will rally in future as EV segment is expanding continuously. Such as companies that produce lithium-ion battery which is the main component used in electric cars, manufacturing by companies like Exide and Amara Raja Batteries. Same growth could see in TATA Power, NTPC, and Adani Green which works in charging infrastructure provider and raw material supplier companies like Vedanta.

Foreign Direct Investment

The new government policy on electric vehicles will facilitate Tesla and other global players' entry into the Indian market, and the market size of electric vehicles in India is the fastest growing in the world. This would lead to increased foreign direct investment in the market, which helps to boost the equity market, mainly in manufacturing, energy, and technology. It will also impact the market volatility as more investors start engaging more in the automobile segment.