PLI program for the automotive sector: automakers welcome the move, but experts say it is not enough

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After a long wait, the Indian government finally approved a Production Linked Incentive Program (PLI) of nearly 26,000 crore for the automotive sector. The Union Cabinet has authorized a total incentive program of 26,058 crore to boost the manufacture of electric and fuel cell vehicles and drones in India for a period of five years. Of this ₹ 25,938 crore has been set for the automotive sector and Rs 120 crore for the drone sector. With the announcement, several original equipment manufacturers (OEMs) issued statements welcoming the firm’s decision.

Also Read: Cabinet Approves ₹ 26,000 Crore Incentive Program To Boost Clean Fuel Vehicles

Shailesh Chandra, Chairman of the Passenger Vehicle Business Unit, Tata Motors, said: “The government has taken a holistic approach to make India ‘Aatmanirbhar’, especially in the technological areas, which will be relevant and important. in the future. The program encourages the manufacture and 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 program that will help accelerate the transition to smart, environmentally friendly and sustainable mobility solutions. The ecosystem will benefit immensely as more jobs will be created, component manufacturers can better plan their future roadmap and reach scale. It is indeed a very strong will displayed by the government to respond to India’s aspiration, by becoming a global hub for the manufacture of green mobility. “

Also Read: Electric Two-Wheeler Manufacturers Welcome PLI Program for Automotive Sector

Shailesh Chandra, President of PV Business Unit, Tata Motors, Says Program Will Help Accelerate Transition To Smart, Environmentally Friendly and Sustainable Mobility Solutions

At the same time, Dr Anish Shah, Managing Director and CEO of Mahindra & Mahindra Limited said, “The government’s automotive PLI program will promote faster acceptance of sustainable mobility solutions. India promises to be one of the largest electric vehicle markets in the world. is a giant step in the right direction, “said Rajesh Jejurikar, Executive Director, Automotive and Agriculture Sectors, Mahindra:” The PLI auto program is a transformational movement that has the potential to create a multiplier effect for both the clean mobility and for the economy. . This gives Indian companies a powerful impetus to compete globally in electric vehicles and technology. “

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Also Read: Maharashtra EV Policy 2021: State Incentives On Electric Vehicles Explained

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According to Toyota, the program will help to give the desired impetus to “Make in India”, thus reducing imports

On the other hand, Vikram Kirloskar, Vice President of Toyota Kirloskar Motor, said: “We would like to appreciate the efforts of the Indian government as the program is quite distinct from other sector programs and it fills the gaps. competitive forces and aims to foster rapid tectonic technological changes to take advantage of the opportunities arising from the realignment of global supply chains. global automotive manufacturing hub. “He added:” We believe the program will help give the desired boost to ‘Make in India’, thereby reducing imports and enabling the Indian automotive industry to move up the value chain to higher value technologies. added. Help attract global investment as several automotive players seek to diversify their supply chains due to the pandemic and emerging geopolitical scenarios. ”

Satyakam Arya, Managing Director and CEO of Daimler India Commercial Vehicles (DICV), said: “Daimler India Commercial Vehicles welcomes the opportunities offered by the new PLI program. This initiative will encourage investments in vital technologies related to sustainability, carbon neutrality and more. . “

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Dailmer India Managing Director and CEO Satyakam Arya said the initiative will encourage investments in vital technologies related to sustainability, carbon neutrality and more.

Vinod Aggarwal, Treasurer, SIAM and Managing Director and CEO of VECV, said: “The Automotive Linkage Incentive Program will lead to the introduction of more advanced technologies for new vehicles in our country. Such technologies will now be introduced, much faster than what we have. The focus on next-generation sensor-based crash avoidance and safety systems would go a long way in making vehicles and our roads one of the safest in the world. PLI will also provide an opportunity for the automotive industry to increase its electrical portfolios, as it will complement existing FAME and GST reduction incentives, for these vehicles. “

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However, some of the auto industry experts we spoke to were more critical of the PLI regime and pointed out two key points: one, this new PLI regime is for the long term and no. t will have no short-term effects, and second, the money will not be enough to boost the government’s electric mobility program. Now the original plan was to spend around 57,000 crore to induce automakers and auto parts makers to build primarily gasoline-powered vehicles and their components for sale and export in the domestic market, with benefits. additional for electric vehicles. Ravi Bhatia, President and Director of JATO India, said: “The PLI program will help the components sector, however, it is not enough for a significant change in the adaptation of electric vehicles. We need to look at case studies from other markets and direct our limited resources. “

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Industry experts believe that the funds allocated to the program are not sufficient for a significant change in the adaptation of electric vehicles

Sridhar V, Partner, Grant Thornton Bharat LLP. said, “The firm-approved PLI program is more forward-looking and encourages the industry to move in a directional way. While there isn’t much for traditional ICE vehicle manufacturers, the incentive covers existing or new manufacturers of electric and hydrogen fuel cell vehicles, paving the way for the future. This, along with other incentives, should encourage more investment in electric vehicles and the underlying charging infrastructure. The program also features a component champion element, which encourages the manufacture and export of advanced technology components listed in the program, which could cover components in the ICE-based segment as well and give reason to rejoice in this. segment also. “

At the same time, Rajeev Singh, Automotive Partner and Leader, Deloitte India supported the program and said: “Automotive is one of the most important sectors contributing 7.1% of our GDP and employs around 37 million people directly and indirectly. . The industry was under pressure even before COVID, and then hit hard by the chip shortage. This PLI program was eagerly awaited and will help stimulate the production of new age vehicles that are cleaner and more environmentally friendly. help increase additional capacity for high-tech safety-related components, which is very critical given the high number of road accidents in the country “

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The 26,000 crore PLI program has two components – the Champion OEM Incentive Program and the Champion Component Incentive Program.

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On the other hand, Avik Chattopadhyay, automotive industry expert and co-founder of branding consultancy firm Expereal had a more critical outlook. He said: “The definition of LIP has been restricted to ‘green’ vehicles and technologies. This is the only major change to take into account that the government does not have too much money to give anyway … It will certainly benefit SMEV members while those of SIAM will be left behind. of the incentive amount for the automotive industry, Avik added, “The amount is just too low… just a little over $ 3.00 billion, which is generally what automakers allocate to their electric vehicle programs. for one year.

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The 26,000 crore PLI program has two components – the Champion OEM Incentive Program and the Champion Component Incentive Program. The Champion OEM Incentive program is a “linked to sales value” program applicable to battery electric vehicles and hydrogen fuel cell vehicles in all segments. On the other hand, the Component Champion Incentive program applies to vehicle components of advanced automotive technology, fully overturned (CKD) / semi overturned (SKD) kits, aggregates of 2-wheeled vehicles, 3-wheeled vehicles, vehicles tourism, commercial vehicles vehicles and tractors.

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