Centre ushers in PLI for auto sector, focus on EVs

New Delhi, Sep 15 : The Centre on Wednesday approved a PLI scheme for the auto sector, especially focusing on environment-friendly automobiles such as electric vehicles (EVs).

The over Rs 25,000 crore scheme is likely to boost production of components as well as give a push to the sector.

In financial parlance, a PLI scheme provides incentives to the industry for boosting domestic production to lessen imports.

Earlier, an outlay of Rs 1.97 lakh crore was made for PLI scheme spanning 13 sectors in budget 2021-22.

As per an official communique, the scheme for the auto sector envisages to overcome the cost disabilities to the industry for manufacture of "advanced automotive technology" products in India.

"The incentive structure will encourage industry to make fresh investments for indigenous global supply chain of 'Advanced Automotive Technology' products," the communique said.

"It is estimated that over a period of five years, the PLI Scheme for Automobile and Auto Components Industry will lead to fresh investment of over Rs 42,500 crore, incremental production of over Rs 2.3 lakh crore and will create additional employment opportunities of over 7.5 lakh jobs.

"Further this will increase India's share in global automotive trade."

According to the communique, the scheme for auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business.

"The scheme has two components viz 'Champion OEM Incentive Scheme' and 'Component Champion Incentive Scheme'. The Champion OEM Incentive scheme is a sales value linked scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments."

"The Component Champion Incentive scheme is a sales value linked scheme, applicable on Advanced Automotive Technology components of vehicles, completely-knocked down (CKD) or semi-knocked down (SKD) kits, vehicle aggregates of 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors etc."

On its part, India Inc welcomed the move.

"As a homegrown leading automotive brand in India, we at Tata Motors are delighted to see the new PLI scheme announced today. The government has taken a holistic approach to make India 'Aatmanirbhar', especially in technology areas, that will be relevant and important in future," Tata Motors Passenger Vehicle Business Unit President Shailesh Chandra said.

"The scheme promotes manufacturing, export of electric vehicles and those running on hydrogen fuel cells, their supporting infrastructure, as well as new technology auto parts requiring advanced production techniques. A progressive scheme which will help in accelerating transition to smart, environment-friendly, sustainable mobility solutions."

ACMA President Sunjay Kapur said: "Thrust on incentivising new age technologies will facilitate creation of a state-of-the-art automotive value chain in the country and give a much-needed impetus to manufacturing of cutting edge automotive products in India."

"Further, with global economies de-risking their supply chains, the PLI will aid India in developing into an attractive alternative source of high-end auto components."

EY India Tax Partner, Automotive sector Saurabh Agarwal said: "The beneficiaries in the PLI scheme for auto sector are likely to be 10 vehicle manufacturers, 50 auto-component manufactures, and 5 new non-automotive investors planning to enter into the automotive sector."

"With the limited budget of INR 26,000 crore approx. likely the industry will see a tough competition with respect to award of the PLI scheme."