The government of India has cleared a Rs. 26,000 crore production-linked incentive (PLI) scheme for the auto and drone sector. Out of the Rs 26,058 crore, Rs 25,938 crore has been set for the automobile sector and Rs 120 crore for the drones sector, to boost production of drones, electric vehicles and hydrogen fuel vehicles. According to the announcement, automobile companies that will invest Rs. 2,000 crore for four-wheelers, and Rs. 1,000 crore for two-wheelers for 5 years will be eligible for the government's PLI scheme, Minister of Information and Broadcasting of India, Anurag Thakur said.
Also Read: Cabinet Approves Rs. 26,000 Crore Incentive To Boost Clean Fuel Vehicles
The PLI scheme will benefit existing companies as well as new investors looking to invest in the automobile and auto component manufacturing business. The focus will be clearly on EVs.
The PLI scheme will benefit existing automotive companies, as well as new investors who are currently not in the automobile or auto component manufacturing business. The government, while announcing the scheme, underscored the focus on environmentally cleaner vehicles. The Minister of Information and Broadcasting stresses the importance that the PLI scheme will work together with the FAME II (Faster Adoption and Manufacture of EVs) scheme, to meet all requirements of the electric vehicle ecosystem. Naturally, the reaction from the auto sector, especially those involved in the electric vehicle segment, has been encouraging.
Mainstream manufacturers like TVS Motor Company have plans to extend their EV line-up in the coming years.
"The revised focus of PLI scheme on alternative fuels, electric vehicles and utilisation of advanced technological innovation, will help the industry move faster towards the future technologies. There is a sense of haste in developing these technologies in India and this scheme gives the right impetus to the industry to move rapidly in that direction. Any country which aspires to lead in a particular sector needs government support and this scheme aims to do just that in the future mobility space. The pandemic has taught us the essence of Aatmanirbharta in every aspect possible. Hence, this is a significant push by the government for its workforce, organisations (OEMs), and the consumers to seek competitive, diverse, and climate conscious mobility solutions and a progressive India," said Venu Srinivasan, Chairman, TVS Motor Company.
Naveen Munjal, Managing Director, Hero Electric, has welcomed the PLI scheme, saying that it will push both the EV industry and also encourage adoption of cleaner technology.
Commenting on the announcement, Naveen Munjal, MD, Hero Electric said, "The recent announcements by the Government of India over the last few months have helped propel the EV industry onto its next level. The earlier push through amendments to FAME II and added revisions by various states have been absolute game changers in bringing down the prices of EVs. With this announcement of allocating a total of Rs. 26,000 crore to encourage and push adoption of cleaner mobility and technologies, this sector is poised to grow exponentially from here on. The outlay for OEM makers and other incentives on manufacturing auto components that help making transportation cleaner will encourage investments and further drive localisation. This will further help bring down the cost of manufacturing thereby benefiting the consumer, the industry and the environment. Hero Electric supports the government's initiative and looks forward to leading the new phase of electric mobility in the coming years."
For two-wheeler makers to avail of the PLI scheme, the amount of new investment required will be Rs. 1,000 crore.
"We highly appreciate our government on clearing the PLI scheme for EVs and hydrogen fuel cell vehicles as it will encourage the auto industry to show more effective results. This will act as a catalyst for capacity and infrastructure development in the EV industry and will lead to faster EV adoption in India through high quality products at lower prices for customers. Such initiatives will help in the transitional process of shifting from traditional fossil fuel-based automobile transportation systems to eco-friendly, cleaner, sustainable, and more efficient EV based systems. Looking forward to such initiatives as it will attract more potential investors as well as help to flourish the current industry veterans," said Jeetendra Sharma, MD and Founder, Okinawa Autotech.
The scheme aims to enhance India's manufacturing capabilities and will boost the sunrise industry of Electric Vehicles. The PLI scheme is going to promote our Indian manufacturers to expand their businesses. The push for a clean environment and sustainable mobility will help us to raise our targets by a higher percentage and expand operations in global markets. This move will further make this segment stronger with the utilization of advanced technology and fasten infrastructure," said Yatin Gupte, Chairman and Managing Director, Wardwizard Innovations & Mobility Ltd.
For electric two-wheeler start-ups, the amount of new investment required will be Rs. 1,000 crore to avail of the PLI scheme, and for OEMs, they must have a minimum of Rs. 10,000 crore revenue.
For two-wheeler makers to avail the scheme, the amount of new investment required will be Rs. 1,000 crore. And for automobile original equipment manufacturers (OEMs) to avail the scheme, they must have a minimum of Rs. 10,000 crore in revenue and will have to make new investments of Rs. 2,000 crore in a period of five years to take benefits from the scheme. Auto component makers must have a global net worth of Rs. 1,000 crore and a clear business plan for investment in advanced automotive technologies to be eligible for the scheme. Analysts say, it's a win-win situation and will also help bring down costs.
"Yes, I think in the current market scenario it will largely help the two- and three-wheeler segment including the existing OEM since they are also into manufacturing EVs. The scheme with a focus on OEM and component manufacturers will also benefit the component manufacturers focusing on advanced automotive technology. Apart from encouraging development, this will also help assisting in bringing down cost to be competitive in the global market," said V Sridhar of Grant Thornton.
For now, the PLI scheme seems to be focussed on emerging technologies, more specifically dealing with the EV sector. A total of 22 components have been covered under the auto components PLI scheme, including flex fuel kit, hydrogen fuel cell, hybrid energy storage systems and electric vehicles parts, including charging ports, drive train, electric vacuum pump, and electric compressors.
