Our Terms & Conditions | Our Privacy Policy
The production-linked incentive (PLI) scheme for the automobile and auto components industry was launched with much fanfare in 2021. It was heralded as a transformative initiative to position the country as a global manufacturing hub for advanced automotive technologies. Yet, three years in, the progress remains underwhelming. The recent data from the ministry of heavy industries (MHI) shows that only 12 out of 82 approved applicants have managed to meet the mandated 50% domestic value addition (DVA) target. This means the majority of the players have not qualified for incentives. In this context, the scheme could be revisited to assess whether or not the targets for DVA are realistic or whether the approach should be different altogether.
If the PLI for smartphones, the highly successful scheme based on which other such plans were designed, serves as a guide, scaling up domestic assembly and becoming part of the global value chain should probably be the first priority. The focus on adding value domestically could probably come later. In the case of smartphones, there is no requirement to add value locally that Apple’s contract manufacturers, Samsung, or domestic players need to fulfil. Instead, they are required to meet incremental sales and production targets, on the basis of a base year that has been fixed as 2019-2020. To be sure, the local content added is monitored as are the number of jobs created but they are not the criteria for disbursing incentives. Exports of smartphones have been rising and the domestic value addition has gone up from low single digits in the initial years to around 20%.
There’s no dispute that on paper, the auto PLI scheme is a visionary step towards promoting the manufacturing of zero-emission vehicles, such as battery electric vehicles and hydrogen fuel cell vehicles. With a budgetary outlay of Rs 25,938 crore over five years, it aims to foster deep localisation and build robust domestic and global supply chains. By incentivising companies that achieve stringent DVA targets, the scheme intends to reduce dependence on imports, enhance technology transfer, and bolster India’s green mobility goals. However, given the current pace of progress the government may want to reexamine the scheme to assess whether there are structural and operational hurdles that need to be addressed.
A breakout year for renewable energy
Rising capital intensity: Decoding India’s informal sector amid policy shifts
FMCG firms seek respite in 2025
Imports of Chinese auto parts see flat growth in H1FY25
The achievers so far are big players with established supply chains, such as Tata Motors, Mahindra & Mahindra, and TVS Motor Company, and component champions like Bosch Automotive Electronics India and Delphi-TVS Technologies. Challenges like inadequate supply chain infrastructure, limited availability of advanced automotive components domestically, and the steep learning curve for new entrants to adapt to high-value manufacturing standards need to be acknowledged. It’s concerning that around 12 companies, including 11 component manufacturers and one original equipment manufacturer, did not make any investments during the first two years of the scheme’s rollout. The lack of participation signals a disconnect between the scheme’s objectives and the ground realities faced by stakeholders. For some firms, the required initial investments may be prohibitively high, while others may lack confidence in the domestic market’s capacity to absorb advanced automotive products. The government should consider recalibrating the scheme’s design and provide more support, especially for new entrants and smaller players. Perhaps the DVA criteria can be eased with a graded increase in the levels to be achieved. That might encourage more players to take advantage of the incentives.
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.