PLI scheme helps auto part makers ride the EV boom

  • Industry News
  • Mar 29,22
A slew of policy measures - PLI schemes (for auto OEM & auto component), extension FAME 2, etc - in the recent past will create more opportunities in electric vehicle space. Auto component players seem to be all geared up for a new paradigm in the market, says Rakesh Rao.
PLI scheme helps auto part makers ride the EV boom

Indian auto component sector is expected to witness investment of Rs 29,834 crore from the 75 approved applicants under the Production Linked Incentive (PLI) Scheme - called as Component Champion Incentive Scheme. Already, PLI scheme for OEM - "Champion OEM Incentive Scheme" - has received a committed investment of Rs 45,016 crore from 20 OEMs. Thus, PLI scheme for automobile and auto component industry in India has been successful in attracting proposed investment of Rs 74,850 crore against the target estimate of investment Rs 42,500 croreover a period of five years. 

A total of 115 companies had filed their application under the PLI scheme for automobile and auto component industry in India which was notified on September 23, 2021. Out of which, five auto OEM companies had applied for both the parts of the scheme. The scheme was open for receiving applications till January 9, 2022. Incentives are applicable under the scheme for Determined Sales of Advanced Automotive Technology (AAT) products (vehicles and components) manufactured in India from April 1, 2022 onwards for a period of 5 consecutive years. 

Dr Mahendra Nath Pandey, Union Heavy Industries Minister, said, “The overwhelming response shows that industry has reposed its faith in India’s stellar progress as a world class manufacturing destination which resonates strongly with Prime Minister’s clarion call of AatmaNirbharBharat - a self-reliant India. India will surely take a huge leap towards cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system."

The Government approved the PLI scheme for automobile and auto component in India for enhancing the country's manufacturing capabilities for Advanced Automotive Products (AAT) with a budgetary outlay of Rs 25,938 crore. The prime objectives of PLI scheme include overcoming cost disabilities, creating economies of scale and building a robust supply chain in areas of AAT products. It will also generate employment. This scheme will facilitate the automobile industry to move up the value chain into higher value-added products.

The scheme has two components viz. Champion OEM incentive scheme and Component Champion incentive scheme. Total 95 applicants have been approved under this PLI scheme. MHI had earlier approved 20 applicants (along with their 12 subsidiaries) for Champion OEM Incentive scheme. Subsequently, Ministry of Heavy Industries (MHI) has processed the applications received under Component Champion incentive scheme and 75 applicants (along with their 56 subsidiaries) have been approved under this category of the scheme. Two auto OEM companies have been approved for both the parts of the scheme.

The PLI Scheme for auto sector was open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business. The Champion OEM Incentive scheme is a ‘sales value linked’ scheme, applicable on battery electric vehicles (BEV) and Hydrogen Fuel Cell Vehicles of all segments. The Component Champion Incentive scheme is a ‘sales value linked’ scheme, applicable on Advanced Automotive Technology components of vehicles, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors, etc. 

According to Sunjay J Kapur, President, Automotive Component Manufacturers Association of India (ACMA) & Chairman of Sona Comstar, selection of companies for Component Champion Incentive scheme has indeed enthused the entire auto component industry and will be a catalyst in our transformational journey from a conventional industry to a mobility industry. "We are indeed very thankful to the government for its generous selection of companies that will benefit from the scheme. That apart, a slew of policy measures announced in the recent past including the extension of FAME-2 scheme, the PLI on ACC battery, the policy initiative on battery swapping and energy as service, among others, will create a new paradigm of technological excellence in the automotive supply chain in India to make it globally competitive," he said.

Vinnie Mehta, Director General, ACMA, added, "The PLI scheme will not just help the component manufacturers become globally competitive but will provide a much-needed momentum to the ‘Make in India’ initiative. The scheme will lead to additional employment opportunities in India and provide an impetus to the industry to invest in cutting edge technologies to stay relevant.”

Some of the companies selected under Component Champion Incentive scheme include Maruti Suzuki India Ltd, Bosch Automotive Electronics India, Schaeffler India Limited, Bharat Forge, Sona BLW Precision Forgings, Tata Autocomp Systems, Toyota Kirloskar Auto Parts, Varroc Engineering, Wabco India, etc.

Harsha Kadam, MD & CEO, Schaeffler India, said, "PLI scheme approval will be a catalyst for our mission of advancing conventional mobility to sustainable mobility through development of intelligent components, systems and services. The scheme will help in creation of economies of scale and robust supply chain in the areas of advanced automotive technology products while overcoming the cost challenges throughout the value chain thereby helping us to gain a competitive edge and drive export capacity.”

Sanjeev Saxena, President (Automotive), Schaeffler India, added, "“PLI scheme has received an overwhelming industry response with a 76% higher than anticipated target. We are confident that the scheme approval provided for Schaeffler India will create significant opportunities in the automotive market through our innovative products. The scheme has given us the impetus to localise our high precision products for future mobility needs and boost manufacturing activities locally, further strengthening the Best Cost Country status for India for manufacturing activities."

PLI scheme for ACC battery storage

Meanwhile, Ministry of Heavy Industries has made allotment for 50 GWh of battery capacity to 4 successful bidders for incentive under PLI scheme for Advanced Chemistry Cell (ACC) battery storage. Four successful bidders included Reliance New Energy Solar Limited; Ola Electric Mobility Private Limited; Hyundai Global Motors Company Limited and Rajesh Exports Limited. These companies will receive incentives under India's Rs 18,100 crore programme to boost local battery cell production. As per the terms of the PLI scheme, selected companies will have to set up manufacturing facility within a period of two years. The incentive will be disbursed thereafter over a period of five years on sale of batteries manufactured in India.

Commenting on the PLI scheme for ACC battery storage, Union Cabinet Minister for Heavy Industries, Dr Mahendra Nath Pandey, said, "The increase in demand for EVs, due to a favorable regulatory framework, has mainly attracted investment in this sector. Today big companies are investing in electric vehicle manufacturing in India and are interested to join us. We should give them more encouragement and keep trying to make India a manufacturing hub. Growth in EV segment of auto industry will definitely help us to achieve India's commitment to Panchtantra given by PM Narendra Modi in COP 26 and will provide huge employment opportunities to Indian youth.”

The Program envisages an investment which will boost domestic manufacturing & also facilitate battery storage demand creation for both electric vehicles and stationary storage along with development of a complete domestic supply chain & Foreign Direct Investment in the country. ACC PLI scheme is expected to accelerate EV adoption and hence translate into net savings of Rs 200,000 crore to Rs 250,000 crore on account of oil import bill during the period of this Programme and increase the share of renewable energy at the national grid level.

Cumulative impact

PLI Scheme for auto sector (Rs 25,938 crore), along with the already launched PLI scheme for ACC battery storage (Rs 18,100 crore) and Faster Adaption of Manufacturing of Electric Vehicles or FAME (Rs 10,000 crore) will enable India to leapfrog from traditional fossil fuel-based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system. The PLI scheme for automobile and auto component industry has been a huge success in terms of the applications received from local as well as globally companies. Apart from Indian business groups, approved applicants include groups from countries such as Japan, Germany, USA, UK, Republic of Korea, Ireland, France, Belgium, Netherlands and Italy. 

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