Electric two-wheeler firms in talks with govt for localisation relief

PLI, PMP targets under strain as rare earth magnet stocks fast dry up

Electric two-wheeler (e2W) firms have approached the Ministry of Heavy Industries (MHI), seeking exemptions from including

electric motors in the localisation calculations under the production-linked incentive (PLI) scheme for automobile and auto components — and from the phased manufacturing programme (PMP) localisation requirement for subsidy eligibility under the PM Electric Drive Revolution in Innovative Vehicle Enhancement scheme. 

In a meeting with the MHI, 2W companies told the government that their stock of rare earth magnets is dwindling, leaving them with no option but to import electric motors — already fitted with rare earth magnets — directly from China. Earlier, many companies would import the magnets from China and assemble the motors locally. 

“For eligibility under the PLI scheme, one must reach a domestic value addition (DVA) of 50 per cent to receive financial incentives, which range from 13-16 per cent. However, now that we’ve stopped local assembly and are importing the entire motor from China, it’s impossible to meet the DVA threshold. We’ve requested a temporary exemption until the situation with China is resolved,” says a senior executive of an e2W company. 

A similar challenge exists under the PMP scheme, which mandates local motor assembly to qualify for subsidies (₹5,000 per vehicle until the end of March 2026). The same executive says the subsidy will be denied if the motor is imported. 2W firms argue that this shift to imports will raise overall production costs. “The price increase varies by original equipment manufacturer, depending on volumes. Also, these motors must be customised for different models, and the vehicles must undergo testing by Indian agencies. So, there will still be a delay of two to three months before hitting the roads,” says the executive. 

The MHI, while acknowledging the challenge, wants any exemption to be strictly time-bound. Some firms have proposed that it will last until the subsidy programme ends in March next year. The government has asked firms to submit a list of critical electric motors (those with magnets) without which the vehicle cannot be produced or operated.  In the four-wheeler sector, however, some major players have already been importing electric motors for their India-assembled models from China.

 

These companies argue that if exemptions are granted to carmakers who had been assembling motors locally, the same localisation rules under the PLI should continue to apply.

 

PLI relief sought on value-add rule

 

·         e2W makers gear up to import motors from China amid rare earth shortages

 

·         Imported motors will still face 2–3-month delays due to customisation and local testing

 

·         Industry seeks exemption from PLI’s domestic value addition norms to retain incentives

 

·         Also pushing to bypass PMP’s local assembly rule to continue receiving ₹5,000 subsidy per vehicle