Everything About Financial & Compliance Aspects of EV Manufacturing in India (2025)

India’s ambition to become a global EV manufacturing hub is accelerating, driven by robust government support and increasing consumer demand. For businesses, especially SMEs and startups, venturing into EV manufacturing in India presents immense opportunities. However, navigating the complex financial incentives and stringent compliance landscape is crucial for sustainable growth. As of 2025, understanding these nuances is more critical than ever to capitalize on the “Green Mobility” revolution.

At CA Sweta Makwana & Associates, a leading CA firm in Mumbai and trusted compliance specialist for SMEs, we help businesses establish robust financial controls and ensure seamless regulatory adherence within the dynamic EV sector.

Understanding the Financial Landscape for EV Manufacturing in India

The Indian government actively promotes EV manufacturing in India through various financial incentives. These aim to reduce upfront costs, encourage localization, and boost demand.

1. Government Subsidies & Incentive Schemes:

PM E-DRIVE Scheme (2024-2026): This flagship scheme has replaced FAME II as the primary demand incentive program. It provides direct subsidies to buyers of electric two-wheelers, three-wheelers, trucks, and ambulances. Manufacturers must ensure their vehicles meet eligibility criteria, including advanced battery technology and ex-factory price caps, to facilitate these benefits for consumers. The scheme also includes grants for e-buses and EV public charging stations.
Production Linked Incentive (PLI) Schemes:
- PLI Scheme for Advanced Chemistry Cell (ACC) Battery Storage: This scheme, with a significant outlay, aims to establish a competitive domestic manufacturing ecosystem for ACC batteries. Manufacturers of EV batteries and components can benefit from financial incentives by meeting specified production and domestic value addition (DVA) targets.
- PLI Scheme for Automobile and Auto Component Industry: This provides incentives for manufacturing Advanced Automotive Technology (AAT) products, including EVs and their components, with a minimum 50% DVA. Eligible manufacturers, including major EV players, are already receiving disbursements.
State-Level Incentives: Many states offer additional subsidies, road tax exemptions, and registration fee waivers for EVs. Manufacturers must be aware of these regional incentives as they can significantly impact sales.

2. Goods and Services Tax (GST) Benefits:

The Indian government has significantly reduced GST rates on EVs. Electric vehicles attract a GST of 5%, which is substantially lower than internal combustion engine (ICE) vehicles. Similarly, EV chargers and charging services also benefit from a reduced GST rate. This lower tax burden directly contributes to making EVs more affordable for consumers and more attractive for manufacturers.

Critical Compliance Aspects for EV Manufacturing in India

Beyond financial incentives, EV manufacturing in India requires strict adherence to a range of regulatory and environmental compliances.

1. Bureau of Indian Standards (BIS) Certification:

Product Safety & Performance: BIS formulates and enforces standards for various EV components, including batteries, motors, and charging infrastructure. New safety standards like IS 18590: 2024 and IS 18606: 2024 for L, M, and N category vehicles emphasize battery safety and powertrain requirements.
Charging Infrastructure Standards: BIS standards for EV chargers (IS 17017 series) ensure safety, interoperability, and performance, aligning with international norms.
Mandatory Certification: Manufacturers must obtain mandatory BIS certification for specific EV components and charging equipment before market entry.

2. Environmental Compliances:

Battery Waste Management (BWM) Rules, 2022: These rules, along with subsequent amendments, govern the responsible management of waste batteries. They place Extended Producer Responsibility (EPR) on manufacturers (producers and importers) for the collection, recycling, and refurbishment of batteries. Manufacturers must meet specific metal-wise recovery targets.
Hazardous Waste Management: EV manufacturing processes, particularly battery production, involve hazardous materials. Manufacturers must comply with the Hazardous and Other Wastes (Management & Transboundary Movement) Rules for safe handling, storage, and disposal of such waste.
Environmental Clearances: New manufacturing units often require environmental clearances from central and state pollution control boards, including Consent to Establish (CTE) and Consent to Operate (CTO).

3. Automotive Research Association of India (ARAI) Standards:

ARAI sets crucial technical standards for vehicle manufacturing in India. EV manufacturers must ensure their vehicles comply with AIS standards related to battery-operated vehicles (AIS 049), hybrid electric vehicles (AIS 102), and constructional and functional safety (AIS 038). ARAI testing is mandatory for every vehicle type before it can be sold.

4. Foreign Exchange Management Act (FEMA) Compliance:

For companies attracting foreign investment or planning overseas expansion as part of their EV manufacturing in India strategy, FEMA compliance is critical. This includes:

Foreign Direct Investment (FDI) Rules: Ensuring compliance with FDI policies, whether through the automatic or government route, including sectoral caps and reporting requirements.
Overseas Direct Investment (ODI) Norms: If an Indian EV manufacturer plans to set up operations or invest in entities abroad, they must adhere to ODI regulations and reporting.
Regular Reporting: Timely filing of forms like FC-GPR (for FDI inflow), FC-TRS (for share transfers), Annual Performance Reports (APR) for ODI, and Foreign Liabilities and Assets (FLA) returns with the RBI.

Common Mistakes to Avoid in EV Manufacturing Compliance

Ignoring Local Content Requirements: Under PLI schemes, strict Domestic Value Addition (DVA) thresholds apply. Failure to meet these can lead to loss of incentives.
Delaying Certifications: Postponing BIS or ARAI certifications can significantly delay product launch and market entry.
Neglecting Environmental Due Diligence: Overlooking waste management protocols or environmental clearances can result in hefty penalties and operational halts.
Inadequate Financial Projections: Over-reliance on subsidies without robust financial planning can jeopardize long-term sustainability.
Failing to Track Policy Changes: The EV policy landscape is evolving rapidly. Not staying updated on new schemes or amendments can lead to missed opportunities or non-compliance.

How CA Sweta Makwana & Associates Can Power Your EV Journey?

Navigating the multifaceted financial and compliance requirements for EV manufacturing in India demands expert guidance. CA Sweta Makwana & Associates, your trusted tax advisor and compliance specialist for startups and SMEs, offers comprehensive support:

Incentive Maximization: We help you identify and apply for eligible government subsidies and PLI schemes, ensuring meticulous documentation.
Tax & Financial Planning: Our team assists with GST compliance, optimizing financial structures, and robust cash flow management.
Regulatory Compliance: We guide you through BIS, ARAI, and environmental compliance, ensuring your products and processes meet all necessary standards.
FEMA Advisory: For companies with international dealings or foreign investments, we ensure complete adherence to FEMA regulations.
Due Diligence & Risk Mitigation: We perform thorough financial and compliance due diligence to identify and mitigate potential risks.

For expert help in navigating the financial and compliance aspects of EV manufacturing in India, get in touch with CA Sweta Makwana & Associates today.

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For the latest updates on EV policies and initiatives in India, refer to the Press Information Bureau (PIB).