Why two- and three-wheeler EV startups are pushing for PLI scheme inclusion

Why startups in two- and three-wheeler EV space have escalated their demand for PLI inclusion

Home-grown electric vehicle startups in the two- and three-wheeler space have been miffed for long over the production-linked incentive (PLI) scheme for automobiles. Recently, they upped the ante, telling the government that the existing PLI scheme has "critical structural constraints". At the core of it all is their grievance that indigenous EV startups were excluded from the ambit of the incentive scheme.

 

Even after multiple discussions between the affected parties and the ministry of heavy industries (MHI), there has been no sign of a review. MHI has reportedly maintained that the scheme is meant only for global champions. That may have prompted startups to approach the Prime Minister’s Office (PMO).   

 

The startups believe the PLI scheme is nurturing a “non-level playing field”, where the big incumbent operators and even some non-automotive players have cornered the attractive incentives. The PLI scheme--with a total budget of ₹25,938 crore--covers passenger cars, three wheelers, quadricycles and auto components, among others.

 

The scheme opened in September 2021 for two categories of players. One was for champion original equipment manufacturers (OEMs) with stiff eligibility conditions such as global revenues of ₹10,000 crore and fixed asset investments of over ₹3,000 crore. Legacy players like Bajaj, Hero Motocorp and TVS made the cut.

 

Second, the scheme sought to incentivise non-automotive companies. That’s how Ola Electric entered the fray.

 

But, companies such as Ather Energy (which came out with its first electric vehicle in 2016), Euler (which introduced its electric three-wheelers in 2021) or Ultraviolette (which unveiled its prototype electric motorcycle in 2019) got left out of the scheme. The startups could not meet the high investment and revenue conditions set for the scheme.

 

In an attempt to find a solution, six electric two-wheeler players – Ather, River Mobility, Euler Motors, Ultraviolette, Raptee and Matter – have, in coordination with the Confederation of Indian Industry (CII),  petitioned the PMO.

 

The EV task force has sent a joint petition to Shaktikanta Das, principal secretary to  Prime Minister Narendra Modi, as well as H D Kumaraswamy,  heavy industries minister. The task force wants the current scheme to open a time-bound application window or a first-come-first-serve rolling mechanism tailored for new age, deep tech EV companies.

 

The affected players are also asking for a differentiated eligibility criterion. Their plea is that instead of just revenue, other factors such as technological capability, research and development (R&D) focus, and domestic value addition should be considered. In fact, in the proposed PLI scheme 2.0 for mobile devices, the government is considering linking incentives to value addition.

 

In case the current auto PLI scheme is extended beyond the five-year tenure, startups are demanding that they be included.

 

What’s in the scheme

 

The auto PLI scheme is important because it provides an incentive of 13-16 per cent on sales value—implying a significant competitive advantage to those who get it. For example, Ola Electric is leveraging competitive advantage to sell its electric motorcycles at aggressive pricing, according to analysts.

 

Aravind Mani, CEO and founder of River Mobility, said: “We have raised ₹700 crore from institutions and have 70 retail outlets. We are selling 4,000-5,000 electric two-wheelers a month. But, currently we are only in the premium end of the market.’’ He argued that if his company wants to make two- wheelers at a lower price point, he wouldn’t be able to compete without the PLI scheme. “So, if I want to scale up production and expand retail outlets, PLI is a must,” said Mani.

 

Ather co-founder Tarun Mehta pointed out that denying them PLI was tantamount to punishing the country. Such a move has forced them to delay product launches too, he said. Ather is now a listed company.

 

PLI incentives to the startups could help in pushing the government goal of 30 per cent penetration in electric two- wheelers by 2030. Motorcycles account for two-thirds of the two-wheeler market of 20 million per annum, but electric motorcycles have a penetration of just 0.1 per cent.

 

Most of the electric motorcycles are being made in the country by non-PLI players (except Ola Electric). These players collectively have around 30 electric models, while Bajaj, TVS and Hero Motocorp dominate the ICE (integrated combustion engine) motorcycle category.

 

In their communication to the PMO, the startups pressed the point that considering that this space is capital-intensive and complex, extending the PLI to them would not only lead to cost reduction but also revolutionise the e-bike sector.               

 

Falling behind target

 

Till January 2026, only ₹2,378 crore or 9.1 per cent of the total outlay of the PLI scheme had been disbursed. That is below MHI’s target of hitting ₹3,754 crore in disbursements in the first two years (up to FY26) of the scheme.    

 

Under the auto PLI scheme, many players, which were considered eligible, have failed to deliver. One of them had to be removed from the scheme.

 

Till FY25, eligible players like Elest and Axis Mobility did not sell any electric two-wheelers in the country, while Hop Electric sold only 289 vehicles and Booma 935, based on data from online platform VAHAN.       

 

Unlike in many other PLI schemes, the MHI has no review mechanism of approved applicants.   

 

In the PLI for advanced chemistry cells batteries, the government has imposed time-bound milestones and penalty charges if eligible players don’t meet targets based on their investment commitments. In bulk drugs, PLI approvals are cancelled for non-performing beneficiaries and capacities reopened for subsequent rounds.

 

Similarly, in the PLI for high-efficiency solar PV modules,  withdrawal of letters of award followed by allocation to entities in the waiting list is incorporated in the scheme.     

 

The auto PLI scheme, despite incentives, has not met many of its expectations such as a boost in exports of electric two-wheelers by the big players. That is because the major players have preferred to sell their PLI-eligible models to get a larger share of the domestic market--leveraging the incentives to lower prices--rather than export aggressively.    

 

India caters to a large export market in Asia, Africa and Latin America when it comes to ICE two-wheelers. But with electric versions gradually becoming a dominant force in these export markets, India could risk losing some of its share to China. According to available data, China exported more than 9.5 million electric two-wheelers in 2025. It has already made a substantial dent in markets like Nepal, Mexico and Argentina. In contrast, India exported only 8,288 electric two-wheelers in FY25.

 

The PLI scheme, which was launched about five years ago, has skewed the overall electric two-wheeler market. From nearly 87 per cent of the sales coming from non-PLI players in FY23, the numbers fell dramatically to 30 per cent in FY26.

 

Armed with incentives, the PLI players were able to price their products more aggressively and build scale, while most of the non-PLI players slowed down. Some got out or became insignificant players, making it a market of four to five players.

 

Will the non-PLI players get a hearing and a place in the scheme? They certainly would like to believe so, if India wants to speed up its electrification drive.