The numbers couldn’t be better, and the intentions couldn’t be stronger: 25,938 crore in incentives, likely 115 applicants, 20 champion original equipment manufacturers (OEMs), and several champion component manufacturers. The Production Linked Incentive (PLI) scheme for the auto sector has been introduced by our government at the most opportune time, when the industry is facing challenges and also witnessing technology disruption at a global level. The country’s industry is well positioned to take advantage of PLI incentives for potential opportunities arising out of re-alignment of global supply chains.
The Indian automotive industry is one of the top five auto-manufacturing countries in the world in terms of volume. The sector generates immense value, making it the backbone of the Indian manufacturing ecosystem, while contributing to about 35% of our manufacturing Gross Domestic Product (GDP). However, the industry has faced several challenges in recent times, including the impact of the COVID pandemic. It improved somewhat thereafter, but recent supply-chain disruptions have delayed its revival, as seen in the low availability of semiconductors, making it difficult to meet customer demand for vehicles.
I am happy to note that the government has taken cognizance of the disruption caused by non-availability of chips and has also launched a PLI scheme for semiconductors, with budgetary allocation. 76,000 crore, which is likely to enable one to build a local semiconductor chip manufacturing ecosystem that can also support the auto industry and other sectors.
Emerging automotive regulations on emissions, energy efficiency and safety, along with consumer trends and digitization, are leading to rapid technological advances in this area, and are supported by the government’s Auto PLI scheme, as well as for electronics (including auto electronics) and semiconductors. The PLI plans are expected to facilitate the development of a quality-driven and robust supply chain for advanced automotive technology parts and components that will not only cater to the Indian market, but overseas markets as well. In addition, the Auto PLI Scheme, along with the PLI Scheme for Advanced Chemical Cells, the Rapid Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) program and other financial benefits from the Central and State Governments, will provide the right impetus for adoption. of electric vehicles.
A notable achievement of the PLI scheme for the auto sector is that it has brought in six non-automotive players, including a few startups, which I am sure will intensify competition in the automotive space. The list of champion component manufacturers is yet to be released, and there are likely to be a number of global majors that will certainly look to India for mass production of advanced automotive technology products.
While an incentive of up to 18% of the fixed sale price will be able to compensate for the inefficiencies faced by the industry in providing attractive value proposition to the investors, I am also happy to note that under the Champion OEM scheme, the applicant will be able to avail the investment. propose melodies 45,016 crores over the next 5 years, giving a major boost to overall investment in India.
The Ministry of Heavy Industries has been very lenient towards the requests of the industry and has engaged in extensive consultations to ensure that the PLI scheme is to make the industry future ready, grow in scale and size and move up the value chain to make India. is designed for. A center for manufacturing high-end advanced technology auto components. The scheme will support the cause of Ek Atmanirbhar Bharat (self-reliant India) and help the country to become a strong player in the global automotive value chains, India’s share in the world’s auto trade is expected to grow from just 1.5% today.
The government has fulfilled its promise of providing appropriate policy support for the sustainable development of our auto industry, the response to which has been very encouraging.
The current policies of the government, especially focused on the auto sector, will revolutionize manufacturing in India, ushering in a new era for our automotive industry. They set the ball rolling for the next few decades, with major investments aimed at high-end and advanced value addition, technology development and advances in the production of greener and cleaner vehicles.
Vikram Kirloskar is the Chairman of SIAM Passenger Vehicle CEO Council and Vice Chairman of Toyota Kirloskar Motor Pvt Ltd.
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