Duty sops to EV makers on an investment pledge by them will only open the doors to Chinese companies in a big way, analysts said.

“India’s decision to reduce import duties of EVs will directly or indirectly benefit Chinese manufacturers, particularly as China is the leading exporter of EVs and associated components,” Shivani Palepu, principal analyst at Gartner, said.

In the "next few years, every third electric vehicle and many passenger and commercial vehicles on India roads could be those made by Chinese firms in India alone or through a joint venture with Indian firms," GTRI founder Ajay Srivastava said.

He said the Indian entry offers a much needed relief to Chinese firms. "China's EV exports to the European Union and the United States are declining due to anti-subsidy probes and increased trade restrictions over the export of subsidised cars/EV batteries."

The government last month announced a policy to incentivise the domestic manufacture of electric vehicles (EVs).

Under this policy, manufacturers who commit themeselves to an investment of at least Rs 4,150 crore and start production within three years will see a reduction in import taxes on certain EVs.

These manufacturers will have to ensure that at least 25 per cent of the components used are sourced locally.

“We might see a rise in Chinese EVs initially, particularly high-end models like BYD and MG Motors. However, in the long run, the market is likely to see a mix of Indian manufacturers dominating the budget and mid-range segments; Chinese and other foreign brands competing in the premium segment; increased collaboration between Indian and foreign companies for EV production in India,” Palepu said.

Data showed that China accounted for half of all EV sales globally through the first half of 2022 and remains the largest EV market in 2023 with 59 per cent of global sales. The Chinese companies selling electric cars are growing at a much faster rate than the non-Chinese brands.

Demand inside China continues to be strong. While foreign automakers such as Tesla, VW and General Motors are selling a lot of EVs, the growth is much faster with Chinese companies.