PLI scheme to promote investment in new age auto tech, says ACMA

PLI scheme to promote investment in new age auto tech, says ACMA

Auto components makers’ body ACMA on Wednesday said the Production Linked Incentive (PLI) Scheme envisions creation of a self-reliant, globally competitive and future ready Indian automotive sector. The PLI scheme with an outlay of Rs 26,000 crore for five years commencing FY22-23, will incentivise investments in new age automotive technologies such as automatic transmission assembly, sensors, super capacitors, parts of EVs, Hydrogen Fuel Cells and its parts, among others.

“Thrust on incentivising new age technologies will facilitate creation of a state-of-the-art automotive value chain in the country and give a much-needed impetus to manufacturing of cutting edge automotive products in India.

“Further, with global economies de-risking their supply chains, the PLI will aid India in developing into an attractive alternative source of high-end auto components,” ACMA President Sanjay Kapur said in a statement.

The country’s largest automaker termed the PLI scheme both progressive and transformational.

“This scheme is both progressive and transformational. It reiterates India’s holistic commitment to a sustainable future and accelerates the country’s progress towards green mobility.

“Several meaningful incentives have been offered across the entire value chain engaged in manufacturing of battery powered electric vehicles and hydrogen fuel cell, as well as their supporting infrastructure and exports,” Tata Motors Executive Director Girish Wagh said in a statement.

Encouraging production of auto components using advanced technologies will boost localisation, domestic manufacturing and also attract foreign investments, he added.

Tata Motors President Passenger Vehicle Business Unit Shailesh Chandra said the scheme promotes manufacturing, export of electric vehicles and those running on hydrogen fuel cells, their supporting infrastructure, as well as new technology auto parts requiring advanced production techniques.

“A progressive scheme which will help in accelerating transition to smart, environment-friendly, sustainable mobility solutions. The automotive ecosystem will benefit tremendously as more jobs will be created, component manufacturers can plan their future roadmap better and achieve scale,” he added.

The Union Cabinet on Wednesday approved a Rs 26,058 crore production linked incentive (PLI) scheme for auto, auto-components and drone industries to enhance India’s manufacturing capabilities.

Incentives worth Rs 26,058 crore will be provided to industry over five years. It is estimated that the PLI scheme will lead to fresh investment of over Rs 42,500 crore in auto, auto components sector, incremental production of over Rs 2.3 lakh crore and will create additional employment opportunities of over 7.5 lakh jobs.

The PLI scheme for automobile and drone industries is part of the overall announcement of PLI schemes for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of Rs 1.97 lakh crore.

The scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business.

Deloitte India Partner Saurabh Kanchan said incentivising new products such as electric vehicles and alternate fuels as well as advanced technologies such as ADAS, ABS and AT would aid in their localisation and wider adoption, thereby enhancing safety and consumer experience.

“The overall approach appears to be balanced, though review of the outlay would be welcome as industry was anticipating incentives in line with the initial announcements. Investment and sales targets would now determine the response of the industry,” he added.

With this PLI support combined with the ACC battery PLI, FAME – II and State EV policies for investment subsidies as well as demand side benefits, EVs in India stand substantially incentivised, Kanchan said.

“Substantially reduced GST rate and corporate tax deductions only add to the overall proposition. The missing links appear to be the charging infrastructure, battery ecosystem and last mile bank finance,” he added.

ICRA Vice-President & Group Head – Corporate Ratings Shamsher Dewan noted that the PLI scheme will encourage local investments and aid in reducing dependence on imports.

EY India Tax Partner (Automotive Sector) Saurabh Agarwal said the PLI scheme for the auto sector is clearly indicative of the government’s shift in focus towards advanced technologies and greener environment.

Further, the inclusion of components for advanced technologies, EVs and HFCVs as a part of the policy are likely to boost the investment in the component industry, he added.

“The beneficiaries in the PLI scheme for auto sector are likely to be 10 vehicle manufacturers, 50 auto-component manufactures and 5 new non-automotive investors planning to enter into the automotive sector. With the limited budget of Rs 26,000 crore approx, the industry will see a tough competition with respect to award of the PLI scheme,” Agarwal said.

In May, the government had approved the PLI scheme for manufacturing advanced chemistry cell (ACC) battery at an estimated outlay of Rs 18,100 crore.

With the objective to promote the Make in India initiative, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage expects to attract foreign and domestic investment of Rs 45,000 crore.

The manufacturing of ACCs is expected to facilitate demand for electric vehicles (EVs), which are proven to be significantly less polluting. ACCs are the new generation of advanced storage technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required.

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