Automotive PLI scheme extension fuels hope for domestic manufacturing

The Ministry of Heavy Industries has extended the Production-Linked Incentive (PLI) Scheme for Automobiles and Auto Components by a year, providing more clarity and flexibility.

The scheme, which now applies for five consecutive financial years starting from FY24, aims to boost domestic manufacturing of Advanced Automotive Technology (AAT) products, reduce imports, and enable the creation of domestic and global supply chains.

The PLI scheme has a budgetary outlay of ₹25,938 crore for incentives, with the total incentive per group company capped at ₹6,485 crore. It offers incentives of up to 18% on the sales of advanced automobile products sold for five years from 2022 onwards.

Qualifying OEMs are required to invest close to ₹1,000 crore and have a group revenue of ₹10,000 crore. So far, three OEMs - Tata Motors, Mahindra, and Ola Electric - have received certification for the scheme for 22 vehicles in total. However, no component maker has received certification yet.

IPO-bound Ola Electric, aiming to raise ₹5,500 crore through its initial public offer, has received the Ministry of Heavy Industries testing agency’s (ARAI’s) nod for meeting the 50% domestic value addition norms to qualify under the non-automotive investor (OEM) category of the government’s auto PLI scheme.

Due to the stringent criteria, very few companies could qualify, leading the industry to seek an extension of the disbursement date and the final deadline. This ensures that companies that could not get incentives in the first year of the scheme don’t miss out on one year of incentives.

The incentive will be disbursed in the following financial year, FY25. An approved applicant will be eligible for benefits for five consecutive financial years, but not beyond March 31, 2028.