PLI Scheme for Manufacturing Automobile & Auto Components in India

The primary goal of the PLI scheme for the automobile and auto components sector in India is to provide incentives for the efficient production of advanced automotive technologies and products. These may include cutting-edge features like sunroofs, automatic gears, warning systems, adaptive front lighting, and other innovative solutions. The scheme aims to encourage the adoption and manufacturing of state-of-the-art automotive components and technologies that can enhance the overall quality and functionality of vehicles. The scheme targets manufacturers of cutting-edge automotive technologies and components, both existing players and new investors. The primary objectives of the scheme are to boost domestic manufacturing, attract investments, enhance exports, and promote the Make in India initiative. Through this scheme, the Indian government aims to increase competitiveness in the global market and foster the development of advanced automotive technologies.

Some Key Features of the Scheme are:

• This scheme has been allocated a budget of INR 259.38 billion (US$3.50 billion) and aims to strengthen India's domestic manufacturing capacity while attracting investments in the automotive manufacturing value chain. The objective is to foster the production of advanced automotive products and enhance India's capabilities in this sector.
• The scheme is structured into four mega schemes: Component Champ, Global Sourcing, Vehicle Champ, and Product-linked Bonuses or Incentives. Each scheme targets specific aspects of the industry and provides incentives accordingly.
• The PLI scheme for the automotive industry is set to be implemented for a duration of five years, commencing from the fiscal year 2022-23. The base year for calculating eligible sales, which will determine the incentives to be disbursed, is considered to be FY 2019-2020.

Calculation of Incentives:

• The base year for calculating eligible sales is determined, which is typically a specific fiscal year before the commencement of the scheme. For example, FY 2019-2020 may be considered as the base year.
• Manufacturers need to calculate the incremental sales of eligible products or components during the scheme period. Incremental sales refer to the increase in sales compared to the base year. This calculation is usually done on an annual basis.
• Manufacturers need to provide relevant documents and data to verify their incremental sales and eligibility for incentives. This may involve submitting audited financial statements, sales reports, and other supporting documents.
• Once the verification and certification process is complete, the government disburses the incentives to the eligible manufacturers. The frequency and mode of disbursement may vary but are typically done periodically throughout the scheme period.

INCENTIVE SLABS FOR CHAMPION OEM AND NEW NON-AUTOMOTIVE (OEM) INVESTOR COMPANY
Determined Sales Value (in Billions INR)	Incentives (Percentage of Determined Sales Value)
Less than or equal to INR 20 Billion	13%
Greater than INR 20 Billion to INR 30 Billion	14%
Greater than INR 30 Billion to INR 40 Billion	15%
Greater than INR 40 Billion	16%
Cumulative determined Sales Value of INR 100 Billion over 5 years	Additional 2%

INCENTIVE SLABS FOR COMPONENT CHAMPION AND NEW NON-AUTOMOTIVE (COMPONENT) INVESTOR COMPANY
Determined Sales Value (in Billions INR)	Incentives (Percentage of Determined Sales Value)
Less than or equal to INR 2.5 Billion	8%
Greater than INR 2.5 Billion to INR 5 Billion	9%
Greater than INR 5 Billion to INR 7.5 Billion	10%
Greater than INR 7.5 Billion	11%
Cumulative determined Sales Value of INR 12.50 Billion over 5 years	Additional 2%
Battery Electric Vehicles and Hydrogen fuel cell vehicles components	Additional 5%

Eligibility

The eligibility criteria for the PLI scheme in the automotive industry aim to determine which companies are qualified to participate and benefit from the incentives provided. The criteria differ for existing automotive firms and new entrants.

BASIC ELIGIBILITY CRITERIA FOR EXISTING COMPANIES
Eligibility Criteria	Auto Original Equipment Manufacturer	Auto -Component
Global Group Revenue (from automotive and/or auto component manufacturing)	Minimum INR 100 Billion	Minimum INR 5 Billion
Investment	Global investment of company or its Group Companies in fixed assets (gross block) of INR 30 Billion.	Global investment of company or its Group Companies in fixed assets (gross block) of INR 1.5 Billion.

ELIGIBILITY CRITERIA FOR NEW NON-AUTOMOTIVE COMPANIES
Eligibility Criteria	New Non-Automotive Investor Company or its Group Companies
Global Net Worth	INR 10 Billion based on audited financial statements for year ending 31st March 2021.
Committed investment in India over 5 year period	As per Minimum New Domestic Investment Conditions

Overall Challenges Involved:

While the PLI scheme for the automotive industry provides incentives and opportunities for recipients, there are certain challenges that they may face-

• Recipients of the PLI scheme need to meet specific performance targets, such as incremental sales, investment commitments, and domestic manufacturing requirements. Achieving these targets can be challenging, especially in a competitive market environment.
• The scheme emphasizes the manufacturing of advanced automotive technologies and products. Recipients may face challenges in adopting and implementing state-of-the-art technologies, which could require significant investments in research and development, infrastructure, and skill development.
• Compliance with quality standards, regulatory requirements, and environmental norms can be a challenge for recipients. Meeting the necessary certifications and ensuring adherence to applicable guidelines and regulations can require additional resources and efforts.
• While the PLI scheme provides incentives, recipients need to ensure their overall financial viability and sustainability. The initial investment costs, operational expenses, and competitive market dynamics can pose financial challenges, especially for new entrants.
• The automotive industry is highly competitive, both domestically and globally. Recipients of the PLI scheme need to navigate intense market competition, not only from other domestic manufacturers but also from international players. Sustaining competitiveness and capturing market share can be a significant challenge.
• Managing a robust and efficient supply chain is crucial for automotive manufacturers. Ensuring timely availability of quality components and managing logistics can present challenges, particularly when scaling up production.
• The automotive industry is evolving rapidly, with new technologies and trends emerging. Recipients need to stay abreast of these advancements, invest in research and development, and adapt their manufacturing processes accordingly to remain competitive.
• Export-oriented recipients may face challenges related to global market dynamics, including fluctuating demand, trade policies, and geopolitical factors. Adapting to changing market conditions and identifying export opportunities can be demanding.

The PLI scheme for the automotive industry in India provides valuable incentives to recipients, aiming to boost domestic manufacturing, attract investments, and enhance the production of advanced automotive technologies and products. However, recipients may encounter various challenges along the way. Meeting performance targets, adopting advanced technologies, ensuring compliance and certification, maintaining financial viability, and navigating market competition are among the primary challenges. Additionally, managing the supply chain, keeping up with technological advancements, and adapting to global market dynamics pose further hurdles. To overcome these challenges, recipients must focus on strategic planning, continuous innovation, efficient operations, and adaptability. By effectively addressing these challenges, recipients can fully leverage the incentives provided by the PLI scheme and position themselves for growth and success in the dynamic automotive industry.


To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.