New Delhi (IANS) Government’s productivity linked incentive (PLI) scheme for auto and auto component industry is set to disrupt the industry in a big way pushing existing large players to open their game plan on electric vehicles (EV) and vehicles made using newer technologies while also bringing in several newer players into the fray competing for a share of expanded market.
Sources indicated that large auto players such as Hyundai, Tata Motors, Maruti Suzuki have already started studying their production plan keeping in mind the PLI scheme. Several smaller players and the startups, who have just recently begun their journey in the EV space, have also begun discussions to push up production in line with the PLI scheme.
“Government support for newer technologies and EVs will continue. Post FAME II and PMP, PLI will further unleash the potential for EVs in 2 and 3 wheelers. PVs and CVs will have to wait till they attain viability from a Total Cost of Ownership (TCO) perspective. Automotive component companies to see further improvement in cost competitiveness and will help position India as an export hub,” said Hemal Thakkar, Director, CRISIL Research.
Another analysis done by Kotak Institutional Equities that the PLI scheme would see rapid adoption by the EV segment, especially two-wheelers and incumbents will have to step up. For auto component manufacturers, the government will provide incentives in the range of 8-13 per cent with additional 5 per cent incentive for manufacturers of battery cell and hydrogen fuel cell components.
“Key beneficiaries in the auto component space will be mostly global MNCs such as Bosch, Continental, Delphi Automotive, Denso Corporation. In our coverage universe, Minda Industries, Endurance Technologies, Varroc Engineering and Schaeffler India can benefit from this scheme,” the brokerage said.
The commercial vehicle segment is also steering the opportunity offered under PLI scheme with interest. “As a leading manufacturer and exporter of commercial vehicles, as well as a front runner in technology since inception, Daimler India Commercial Vehicles welcomes the opportunities offered by the newly announced PLI scheme. This initiative will encourage investment in vital technologies related to sustainability, carbon neutrality and more.” said Satyakam Arya, Managing Director & CEO, Daimler India Commercial Vehicles (DICV).
Auto is one of the most important sectors contributing to 7.1 per cent of our GDP and employs about 37 million people directly and indirectly. The sector has been under stress even before CO and then subsequently has been hit hard due to chip shortage. As per a CRISIL overall capacity utilisation rate at the four-wheeler makers dropped to 50-55 per cent at the end of FY21 from 70-75 per cent in FY19. The future of the industry would be driven by new technologies and it is here that PLI pushed manufacturing would come to aid.
“This PLI scheme was much awaited and will help in boosting production of new age vehicles which are more clean and environment friendly. It will also help in boosting additional capacity for safety related high tech components which is very critical given the high number of road accidents in the country,” said Rajeev Singh, Partner and Automotive Leader, Deloitte India.
The government on Wednesday approved the PLI scheme for the auto industry with an outlay of Rs 26,400 crore which has been slashed from the initial outlay of Rs 57,000 crore. The current PLI scheme is targeted to enable India to leapfrog to EVs and incentivize emergence of an advanced automotive technologies supply chain in India. The PLI scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in the automobile or auto component manufacturing business.
The scheme has two components, viz. Champion OEM Incentive Scheme — ‘sales value linked’ scheme, applicable on BEVs and hydrogen fuel cell vehicles of all segments, and Component Champion Incentive Scheme – ‘sales value linked’ scheme, applicable on advanced automotive technology components of 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors.
The scheme will be effective from FY2023 for five years and the base year for eligibility criteria would be FY2020. A total of 10 OEMs, 50 auto component makers and five new non-automotive investors will benefit from the scheme. To avail the scheme, OEMs should have a minimum of Rs 10,000 crore in revenue and Rs 3,000 crore bn investment in fixed assets, auto component makers should have minimum revenue of Rs 500 crore and Rs 150 crore investment in fixed assets.
New non-automotive investors must have a global net worth of Rs 1,000 and a clear business plan for investment in advanced automotive technologies to be eligible under the PLI scheme. Incentives under the auto PLI scheme will range from 8-13 per cent, with additional 5 per cent incentive for electric and hydrogen fuel cell vehicles.