PLI scheme will accelerate commitment to new technologies: Automakers

The government’s productivity-linked incentive (PLI) scheme for the automotive sector will encourage companies to investment more on new technologies, produce parts locally, and generate additional employment, said top officials at auto firms.

This signals that there is no room for legacy automakers’ reluctance on switching to green vehicles in the world’s fifth largest auto market, experts said.

Rajiv Bajaj, managing director, Bajaj Auto, said the support from the policymakers towards futuristic vehicles puts greater onus on firms even as it steers clear of the earlier objectives of enhancing exports and employment. “The government’s PLI scheme in its new TLI (technology-linked incentive) avatar suggests that 18 months of dialogue with industry to enhance exports and, hence, employment is now history,” said Bajaj.

Support has been diverted to fuel e-scooters like the Chetak that are already entitled to a combined subsidies (central and state) of Rs 1 lakh per vehicle – as also other such advanced vehicles, technologies or components – to fulfill their great responsibility with even greater subsidy, said Bajaj. The Rs 26,058-crore scheme has two components — champion original equipment manufacturer (OEM) incentive scheme and component champion incentive scheme. The OEM incentive scheme is a sales value-linked scheme, applicable on electric vehicles (EVs) and hydrogen fuel cell vehicles across all segments.

Coming on the heels of the FAME II, the new scheme reinforces the government’s resolve to push cleaner technologies. “It would further unleash the potential for EVs in two- and three-wheelers,” said Hemal Thakkar, director, CRISIL Research. However, PV and commercial vehicles will have to wait till they attain viability from a total cost of ownership (TCO) perspective. Auto­motive component firms would see further improvement in cost competitiveness and will help position India as an export hub, he added. 

R C Bhargava, chairman of behemoth Maruti Suzuki India, said the scheme looks good prima facie, but Maruti’s decision to foray into new technologies would be bas­ed on merit. The policy takes care of some aspects of the cost, but there are others like market conditions and affordability that a company has to manage, he said.

“If Maruti starts making EVs, it will also get the benefits. It doesn’t need PLI for existing vehicles. Having said that, fundamentally, Maruti’s programmes for new technologies remain unchanged. It will bring new technologies on its merit and market conditions,” said Bhargava.

To be sure, the market leader that controls half of India’s PV market is one of the few mass carmakers that remains conspicuous by its absence in the segment. Others including Hyundai Motor India, Tata Motors, Mahindra and Mahindra have either launched an EV offering or have spelled out such plans. “The announcement of PLI scheme is right on time when India is witnessing rapid transformation in auto manufacturing,” said SS Kim, managing director and chief executive officer, Hyundai Motor India. This will make domestic manufacturing globally competitive, be instrumental in achieving government’s vision of Aatmanirbhar Bharat, and position India as a mobility hub.

The scheme will contribute towards reducing carbon emissions and oil imports with local manufacturing. “SIAM (Society of Indian Automobile Manufacturers) will be happy to engage with the Ministry of Heavy Industries for detailing and fine-tuning, execution and further strengthening the scheme,” said Kenichi Ayukawa, president, Siam.

According to Vipin Sondhi, MD and CEO, Ashok Leyland, the scheme provides incentives for incremental performance by the firms as they move towards making India a strong hub for e-mobility while also looking at harnessing the potential of hydrogen energy. “The PLI scheme has the potential to substantially increase volumes and will provide a huge opportunity for exports to grow,” said Sondhi. Anish Shah, MD and CEO of Mahindra & Mahindra, echoed the view. “This scheme is a giant step in the right direction,” he said.