Production Linked Incentive Program for EV and Auto Component Manufacturing Approved

The Union Government has notified the Production Linked Incentive (PLI) program for automobile and auto components after approving it recently. The PLI program aims to encourage the industry to make fresh investments to make advanced auto products.

Incentives under the program are open to existing auto companies and new non-auto investors. It has two components — Champion OEM Incentive Program and Component Champion Incentive Program.

The Champion OEM Incentive is a sales value linked program applicable to all segments of battery electric vehicles (BEV) and hydrogen fuel cell vehicles. An incentive ranging from 13-18% is offered in this component. It is also applicable to any other advanced automotive technology vehicle prescribed by the Ministry of Heavy Industries.

Incentive proposed under the Champion OEM Incentive program to EV manufacturers will be independent of the incentives given under the FAME II program, where incentives are provided to customers who buy the vehicles and not to the manufacturers. Incentives can be claimed under this program for BEVs having Advanced Chemistry Cell (ACC) batteries, for which separate incentives have been declared under the PLI program for ACC.

The Component Champion Incentive is a sales value linked program applicable to pre-approved advanced automotive technology components of all vehicles, wherein incentives ranging from 8-13% are offered. An additional incentive of 5% is provided for component manufacturers of EVs and hydrogen fuel cell vehicles. It is also applicable to completely knocked down (CKD) and semi-knocked down (SKD) kits, vehicle aggregates of two-wheelers, three-wheelers, passenger vehicles, commercial vehicles, tractors, and automobiles for military use.

Incentive Slabs for Champion OEM and New Non-Automotive (OEM) Investor Company

The eligibility criteria for a company or its consortium with a presence in India or globally in the automotive vehicle and components manufacturing business is a minimum revenue of ₹100 billion (~$1.35 billion) for auto OEM manufacturer and ₹5 billion (~$67.36 million) for an auto-component manufacturer. The investment of the company or its consortium in fixed assets should be ₹30 billion (~$404.24 million) for auto OEM and ₹1.5 billion (~$20.21 million) for auto-component manufacturers.

New non-automotive investor companies or their consortium can avail incentives if they present a clear business plan to invest in India and generate revenues from advanced automotive technology vehicles or components manufacturing. They should have a net worth of ₹10 billion (~$134.74 million) based on audited financial statements for the year ending March 31, 2021, and commit to investing in India over five years.

It is estimated that the PLI program will lead to investments of over ₹425 billion (~$5.72 billion) in five years and incremental production of over ₹2.3 trillion (~$ 31 billion). The program is expected to create over 750,000 jobs.

In June this year, the government issued a notification for the PLI incentives under the ‘National program on Advanced Chemical Cell (ACC) battery storage’ to implement ACC manufacturing facilities for EVs.

The program’s total incentive payout for five years is ₹181 billion (~$2.47 billion).

Several states, including AssamMaharashtraDelhi, and Gujarat, have launched state-specific EV policies to bolster EV production in their respective states.