The auto industry’s PLI strategy will create a self-sustaining framework for electric mobility.
The Union Cabinet has authorised a PLI plan (Production-Linked Incentive) that encourages the development of sophisticated technologies, the most prominent of which is battery-electric technology. The scheme, which has been in the works for some time, offers a Rs 26,058 crore incentive that will be paid out over five years.
Many industry leaders have come forward to voice their active support for the programme, praising its timely debut and the benefits it would bring to the EV field. But how does it serve both the manufacturer and the consumer, while also boosting local EV technology production?
Tesla and many other manufacturers of two, three, and four-wheeled electric vehicles are likely to gain from the new plan.
How does a PLI Strategy work?
A PLI plan, or Production-Linked Incentive, gives corporations incentives to increase domestic production. The government does this to make products more competitively priced, lessen a country’s reliance on imports, and create jobs. A PLI plan has eligibility conditions, which in this case include global revenue of Rs 10,000 crore from an OEM and Rs 500 crore from an auto-component manufacturer.
They must also have a global investment of Rs 3,000 crore in fixed assets (for OEMs) and a minimum of Rs 150 crore in the auto-component market. The entire cost of Rs 26,058 crore is half of the amount set aside for the project.
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The incentives in this PLI, like most, are entirely percentage-based, with the government offering a maximum of 18 percent incentives depending on a company’s incremental turnover. The goal is to support the development of technologies that are currently deficient in India, and it can be used in conjunction with other schemes like the Faster Adoption of Manufacturing of Electric Vehicles (FAME) scheme and the PLI plan for advanced chemistry cells (ACC). A PLI of this size can aid in the quick development of the EV supply and value chain apparatus, which has yet to be fully developed.
The programme focuses on electric cars and hydrogen fuel cell vehicles, as well as their components. Champion OEM Incentive Scheme and Champion Component Incentive Scheme are the two independent schemes. Among the 22 products described on the component, the front is hydrogen fuel components, flex-fuel kits, high voltage connections and connectors and cables, AC and DC charging inlet and outlet ports, electric motor components, and electric compressor.
The introduction of such a large PLI scheme, when paired with current schemes like FAME, numerous state subsidies, and the ACC scheme, provides a direct financial incentive for brands as well as an indirect one in the form of investments that such a plan is anticipated to attract. The government estimates that the PLI plan will bring in Rs 42,500 crore in investments. Given that conventional carmakers have been completely excluded from the PLI, this adds to a growing list of disincentives to invest in conventional powertrain, even though they may still account for the majority of market share throughout the PLI.
Given that the scheme is intended to increase employment in the EV, fuel cell manufacturer, and component sectors (by 750,000 jobs), it’s likely to attract more engineering and administrative expertise to EV start-ups and manufacturers aiming to make a large move to EVs. The idea would also make it more profitable for companies like Tesla Motors, who have previously sought tax breaks.
While programmes like FAME II and other state incentives have made it simpler to buy electric vehicles and build EV infrastructure, no programme has focused on simplifying the supply chain until recently.
However, India is planning far ahead when it comes to establishing a PLI of this sort. A programme like this will go a long way toward bolstering India’s position as a zero-emission vehicle manufacturer.
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