India’s Auto PLI Scheme: Gears Up for Growth, But Challenges Remain
India’s automotive industry is poised for a significant boost as more companies join the Production Linked Incentive (PLI) scheme. Recent announcements indicate that three additional vehicle manufacturers and five auto component suppliers will begin receiving financial incentives from fiscal year 2027 (FY27). This expansion, detailed by Hanif Qureshi, Additional Secretary at the Ministry of Heavy Industries (MHI), signals a deepening commitment to bolstering domestic manufacturing and reducing reliance on imports.
The PLI Scheme: A Quick Recap
Launched in September 2021 with a ₹25,938 crore (approximately $3.1 billion) outlay, the auto PLI scheme aims to incentivize the production of advanced automotive technology vehicles and components. Initially, 82 companies were approved out of 115 applicants. The scheme focuses heavily on promoting domestic value addition (DVA) – requiring companies to source over 50% of their components locally to qualify for incentives. This is a key element in the government’s ‘Make in India’ initiative.
Bank Guarantees and Accountability
The government is demonstrating a firm stance on accountability. Bank guarantees of 10 auto component manufacturers who failed to make any investments over the past two years will be invoked. This sends a clear message: participation in the PLI scheme requires genuine commitment and tangible progress. While the companies haven’t been named, this action underscores the government’s dedication to ensuring the scheme’s effectiveness. This is a crucial step in preventing “shell” companies from simply benefiting from the incentives without contributing to actual production.
Disbursement Trends and Future Projections
Disbursements under the PLI scheme have been gradually increasing. ₹2.63 crore was disbursed in FY24, rising to ₹325.37 crore in FY25. So far in FY26, approximately ₹2,000 crore has been released out of a sanctioned ₹2,091.26 crore. The initial slow pace was attributed to companies establishing manufacturing capabilities and achieving the required DVA threshold. However, Qureshi anticipates a “multi-fold” increase in disbursements in the coming year as more companies begin selling DVA-compliant vehicles.
Who’s Receiving Incentives Now – and Who’s Coming Onboard?
Currently, Mahindra & Mahindra (M&M), Tata Motors, Bajaj Auto, TVS Motor, and Ola Electric are among the vehicle manufacturers benefiting from the scheme. Key auto component makers like Delphi-TVS Technologies, Sona BLW Precision Forgings, Bosch Automotive Electronics India, and Tata Autocomp Systems are also receiving financial support.
Looking ahead, Eicher Motors, Pinnacle Mobility Solutions, and Hero MotoCorp are expected to join the ranks in FY27, alongside component manufacturers Dana TM4 India, Uno Minda, Varroc Engineering, Napino Auto & Electronics, and Cummins Technologies India. Toyota Kirloskar Auto Parts, while pausing incentives in FY26, will resume participation in FY27, demonstrating a long-term commitment to the scheme.
The Electric Vehicle (EV) Impact: Numbers Tell the Story
The PLI scheme is already having a tangible impact on the EV sector. To date, incentives have been provided for over 1.042 million electric two-wheelers, 238,385 electric three-wheelers, 79,540 electric four-wheelers, and 1,391 electric buses. This data highlights the scheme’s effectiveness in accelerating the adoption of electric mobility in India. NITI Aayog projects that EVs could account for 30% of private cars, 70% of commercial vehicles, and 80% of two and three-wheelers by 2030, a target the PLI scheme is actively supporting.
Future Trends and Challenges
Several key trends are shaping the future of the auto PLI scheme and the Indian automotive industry:
- Supply Chain Resilience: The focus on DVA will continue to drive investment in local component manufacturing, reducing dependence on global supply chains, particularly in light of recent geopolitical disruptions.
- Technological Advancement: The scheme is likely to evolve to incentivize the development and production of even more advanced automotive technologies, including connected and autonomous vehicles.
- EV Infrastructure Development: The growth of the EV sector will necessitate significant investment in charging infrastructure. Government policies and private sector initiatives will be crucial in addressing this challenge.
- Skill Development: A skilled workforce is essential to support the growing automotive industry. Training programs and educational initiatives will be vital to bridge the skills gap.
However, challenges remain. Maintaining consistent policy support, streamlining approval processes, and ensuring fair competition are crucial for the long-term success of the PLI scheme. The automotive industry is also facing global headwinds, including rising raw material costs and economic uncertainty.
FAQ
Q: What is the main goal of the Auto PLI scheme?
A: To boost domestic manufacturing of advanced automotive technology vehicles and components, reduce import dependence, and promote the ‘Make in India’ initiative.
Q: What is Domestic Value Addition (DVA)?
A: DVA refers to the percentage of a product’s value that is sourced from within India. Companies must achieve over 50% DVA to qualify for PLI incentives.
Q: What happens if a company doesn’t invest as promised under the PLI scheme?
A: The government can invoke the company’s bank guarantee, effectively forfeiting the security deposit.
Q: Which companies are currently benefiting from the Auto PLI scheme?
A: Mahindra & Mahindra, Tata Motors, Bajaj Auto, TVS Motor, Ola Electric, Delphi-TVS Technologies, Sona BLW Precision Forgings, Bosch Automotive Electronics India, and Tata Autocomp Systems are among the current beneficiaries.
Explore our other articles on India’s Manufacturing Sector and Electric Vehicle Policy for a deeper understanding of the evolving landscape.
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