PRODUCTION LINKED INCENTIVE IN AUTOMOBILE INDUSTRY
PREPARING INDIA FOR ADVANCED AUTOMOTIVE TECHNOLOGIES
Globally climate change and its adverse impact is fast becoming a crisis. Governments around the world are regulating the automobile industry and encouraging it to move towards cleaner technologies. Automotive industry is fast accepting these challenges and moving towards Battery Electric Vehicles, Connected, autonomous vehicles. Shared mobility is another change that automotive original equipment manufacturers (OEMs) are adopting. In addition, vehicle and pedestrian safety are also key priorities for the industry.
Indian automobile industry being part of the global automobile value chain cannot remain isolated from these trends. Climate change, pollution control, reducing road fatalities and efficient transportation are also top priorities for the Government of India. We need to embrace these changes and be ready to prepare for the future.
Government of India looks at the automobile industry as a champion industry. We are committed to further development and growth of the automotive and automotive component supplier industry. Whether we like it or not electrification, connected vehicles, more electronics per vehicle are inevitable disruptions that the automotive industry will have to adapt to.
We recognize that Indian market may be currently subscale in these technologies hence we would have significant cost disabilities and capabilities gap. However, if we do not address this gap now then we will miss the next decade of automotive investments. Also, our Advanced Automotive Technology value chain will remain weak, and we would miss the next big opportunity in the automotive domain.
Building competitiveness in Advanced Automotive Technologies (AAT) will be a long-term structural change. But the beginning of that change will need a catalyst. We believe that the Automotive PLI scheme will act as that catalyst to build new capabilities in the Automotive OEM and supplier industry segments.
The objective of the Automotive PLI scheme will be to attract new investments in AAT. AAT is not restricted to Electric vehicles but also includes automotive electronics, sensors, green technologies, safety technologies that may find application in Battery Electric vehicles as well as Internal Combustion Engine-based vehicles.
Investments will result in growth in sales and production of AAT in India. The PLI will provide incentives based on growth in AAT sales to cover the significant cost disabilities that may exist in these segments. The policy aims to encourage large scale investments by OEMs and Automotive component suppliers in India. In addition, it will ensure transfer and assimilation of these AAT by the automotive industry ecosystem in India.
ELIGIBILITY FOR AUTOMOTIVE PLI SCHEME
The PLI scheme is open to existing automotive companies as well as Non-Automotive investors.
Existing Automotive OEMs with more than Rs.10,000 crore Global revenues and Rs. 3,000 crore of Gross asset base will be eligible to apply for this scheme.
The scheme has two parts. First part is Champion OEM Incentive Scheme in which a minimum AAT investment commitment of Rs.2,000 crore for existing 4-wheeler OEMs will need to be achieved over the 5 years of the scheme. This criterion will be pegged at Rs.1,000 crore investment commitment for existing 2-wheeler and 3-wheeler OEMs.
Existing Automotive component suppliers with more than Rs.500 crore in global revenues and Rs. 150 crore of fixed assets will be eligible for this scheme.
The second part of the scheme is Component Champion Incentive Scheme in which existing Component suppliers will have to meet minimum investment commitment of Rs.250 crore over 5 years period.
Non-Automotive investors will need to demonstrate a Net worth of over Rs.1000 crore to be eligible to apply for this scheme. Also, they will need to meet minimum AAT investment commitment of Rs.2,000 crore under Champion OEM part and Rs. 500 crore under Component Champion part, over the 5 years of the scheme
SCHEME AND WORKING DETAILS
Each of the eligible participants will need to apply to be part of the Automotive PLI along with a detailed plan on how they would achieve investment conditions and the production/ revenue growth plans. Companies with the most attractive investment and growth commitment will be prioritized based on a transparent process of evaluation. Qualifying participants will receive an incentive @ 8-18% of the growth in sales of AAT products. Automotive PLI will bring great benefits to the country and automotive industry.
We expect that Automotive PLI will result in almost Rs.42,500 crore of new investments, generate growth in output revenues of almost Rs.2,31,500 crore. This will translate into direct and indirect employment opportunities for over 7.5 Lakh people over the 5 years of the scheme. The PLI will help build the foundation for India to diversify into a new and fast emerging new segment within the automotive value chain.
Automotive PLI can be successful only if the industry leaders understand the context and intent of the scheme with an open mind. Look at how it can benefit the whole industry and the nation and help India become future ready. We request you to study the scheme details and see how you can contribute to make it successful and derive benefits in the process. Let the Government, Industry, Domestic as well as International Investors work together as ‘Team India’ to make this scheme a resounding success. Let us be ready to prepare for the future.