Why an imported EV costs about double in India: the customs duty maths, explained

The short answer: India taxes a fully built imported car at the border, not at the showroom, and the rate is close to the value of the car itself. On completely built units with a CIF value above USD 40,000, the basic customs duty is 70 per cent, with a 40 per cent Agriculture Infrastructure and Development Cess on top, after the 10 per cent Social Welfare Surcharge was removed in the 2025 Budget. Electrive puts the standard rate on a fully built EV at 110 per cent. That is why Tesla's Model Y, imported into India as a full CBU, launched at ₹59.89 lakh for the rear-wheel-drive version and ₹67.89 lakh for the Long Range, for a car sold far cheaper in the markets it is built in.

CIF means cost, insurance and freight, so the duty is calculated on the landed value before any Indian margin, dealer cost or state tax. Stack the duty on that number and the ex-showroom price roughly doubles before a single rupee of profit is added. This is also why global makers who want volume in India assemble locally instead of shipping finished cars.

The 15 per cent window, and its conditions

The Scheme to Promote Manufacturing of Electric Passenger Cars in India, SPMEPCI, is the official escape hatch. It cuts duty to 15 per cent on fully built EVs with a CIF value of USD 35,000 and above, capped at 8,000 units a year with carryover provisions. The price of entry is heavy: at least ₹4,150 crore of investment over three years, 25 per cent domestic value addition by year three and 50 per cent by year five, revenue of ₹5,000 crore in year four and ₹7,500 crore in year five, a bank guarantee matching the duty forgone or ₹4,150 crore, whichever is higher, and a non-refundable ₹5 lakh application fee. Total duty forgone is capped at ₹6,484 crore. Applicants need global automotive revenue of at least ₹10,000 crore and ₹3,000 crore of global fixed assets in the auto business.

The first application window ran from 24 June 2025, with the ministry keeping the right to reopen it until 15 March 2026. In November 2025, Hanif Qureshi of the Ministry of Heavy Industries said the second window could slip because India was still negotiating its free trade agreement with the EU. So for a buyer, the practical point is that the 15 per cent rate is not a general import rate. It is a company-specific concession tied to a factory commitment.

What the EU deal changes, and when

Negotiations on the India to EU free trade agreement concluded on 27 January 2026. Electric cars are the slowest-moving part of it. On India's side, EV tariff cuts start only in the fifth year of implementation, with a quota of 20,000 vehicles at 30 per cent duty, down from the current 110 per cent, and vehicles below EUR 20,000 CIF excluded. The rate then falls by 4 percentage points a year to 10 per cent by year ten, and the quota grows to 90,000 vehicles by year fourteen. The two sides aimed to sign by the end of 2026 for effect in 2027, which puts the first EV tariff relief somewhere around the early 2030s.

The Bengaluru bill does not stop at customs

Karnataka buyers have a second line to budget for. The state exempted EVs from road tax in 2017, then amended the rule in March 2024 so that EVs priced above ₹25 lakh pay a 10 per cent lifetime tax. A revision effective March 2026 extends the tax downward, 5 per cent below ₹10 lakh and 8 per cent from ₹10 lakh to ₹25 lakh, sparing only electric two-wheelers. On a ₹60 lakh imported EV, that 10 per cent slab is another ₹6 lakh on the on-road price, after the border has already taken its cut.

Sources

• Tesla Model Y launched in India at Rs 59.89 lakh
• Budget 2025: Customs duty on imported cars remains unchanged
• India details scheme to promote local electric car production
• Reopening of SPMEPCI window may face delays amid India-EU trade talks: Hanif Qureshi
• India-EU FTA to cut tariffs on up to 315,000 EVs annually
• Karnataka plans to reintroduce lifetime tax on EVs