Automotive sector

PLI scheme: PLI scheme of Rs 26,000 crore to orient the automotive sector towards electric, hybrid and fuel cell vehicles

The government on Wednesday approved the Rs 25,938 crore Production Incentive Program (PLI) for the automotive and auto accessories sectors to promote domestic green vehicle manufacturing and enable India to be part of the global supply chain.

Gasoline and diesel vehicles were not included in this scheme. Instead, the focus is on promoting the transition to clean automotive technologies such as electric vehicles and hydrogen fuel cells, which are expected to grow in volume in the years to come.

The program is expected to generate investment of over Rs 42,500 crore in five years and additional production of over Rs 2.3 lakh crore, according to government estimates. Additional jobs for more than 750,000 people will be generated.

“Automotive components sector exports are now worth $ 15 billion while imports are worth $ 17 billion. This program will help reduce the import of components by 17 billion dollars, ”Anurag Thakur, Minister of Information and Broadcasting, said on Wednesday. India’s auto industry only accounts for 2% of the global industry and this must also be higher, he said.

Both existing players and new investors will be eligible to obtain benefits under the scheme. Benefits will be proportional to the income of eligible businesses and paid over a period of five years.

“The beneficiaries of the PLI program for the automotive sector are likely to be 10 automakers, 50 manufacturers of automotive components and 5 new non-automotive investors planning to enter the automotive sector,” said Saurabh Agarwal, Tax Partner, Automotive Sector, EY. India.

Spending for the program has been cut in half from the previous plan to Rs 57,043 crore. The limited budget is likely to lead to fierce competition in the industry for who will benefit from the PLI program, Agarwal said.

Existing auto players will need to make new investments of Rs 2,000 crore over the next five years to qualify for the program. This number has been lowered for manufacturers of two and three wheelers to Rs 1,000 crore. A new player will also need to invest at least Rs 2,000 crore.

On the automotive components side, new players will need to invest Rs 500 crore while existing players will need to invest a minimum of Rs 250 crore over the next five years to be part of the program.

“The incentive to encourage new technologies will facilitate the creation of an advanced automotive value chain in the country and provide a much needed boost to the manufacturing of advanced automotive products in India,” said Sunjay Kapur, President of Automotive. Association of Component Manufacturers of India.

As global economies seek to reduce risks in their supply chains, the PLI program will help make India an attractive alternative source of premium automotive components, he said.

The PLI program for the automotive sector will complement the existing PLI program for Advanced Chemistry Cell and Faster Adaption of Manufacturing of Electric Vehicles phase-2 (FAME-2) to give a boost to electric vehicle manufacturing in India, Thakur said . These two existing programs have budgets of Rs 18,100 crore and Rs 10,000 crore, respectively.

The government believes that extending incentives only to green technologies will prompt automakers to urgently focus on bringing electric vehicles and more sustainable technologies to the market.

This program is part of the overall production-related incentives announced in the budget earlier this year with a financial expenditure of Rs 1.97 lakh crore to improve manufacturing capacities and exports in 13 identified sectors.