Our automotive PLI scheme has begun to turbocharge the sector
PremiumA new set of policies has set the ball rolling for the next few decades of technological advancement and higher value addition
The numbers cannot get better, and the intent cannot be stronger: ₹25,938 crore in incentives, 115 applicants, 20 champion original equipment manufacturers (OEMs), and the likelihood of numerous champion component manufacturers. The Production Linked Incentive (PLI) scheme for the auto sector has been introduced by our government at the most appropriate time, when the industry is faced with challenges and is also witnessing technology disruptions globally. The country’s industry is well positioned to leverage PLI incentives for potential opportunities arising from the re-alignment of global supply chains.
The Indian automotive industry is among those of the world’s top five auto-manufacturing nations in terms of volume. The sector generates immense value, which makes it the backbone of the Indian manufacturing ecosystem, while contributing nearly 35% to our manufacturing gross domestic product (GDP). However, the industry has witnessed multiple challenges in the recent past, including the impact of the covid pandemic. It did see some recovery thereafter, but its revival has been delayed by recent supply-chain disruptions, as seen in the reduced availability of semiconductors, which has made it harder to meet customer demand for vehicles.
I am happy to note that the government has taken cognizance of the disruption caused by chip unavailability and has also introduced a PLI scheme for semiconductors, with a budgetary allocation of ₹76,000 crore, which is likely to be an enabler in building a local semiconductor chip manufacturing ecosystem that can support the auto industry and other sectors as well.
Emerging automotive regulations on emissions, energy efficiency and safety, along with consumer trends and digitization, are leading to rapid technological advancements in the sector, and the government’s auto PLI scheme along with PLI schemes for electronics (including auto electronics) and semiconductors is expected to facilitate the development of a quality-driven and robust supply chain for advanced automotive technology parts and components that will cater not just to the Indian market, but overseas markets as well. Further, the auto PLI scheme, along with a PLI scheme for advanced chemistry cells, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) programme and other fiscal benefits from the central and state governments, will provide the right impetus for the adoption of electric vehicles.
A remarkable achievement of the PLI scheme for the auto sector is that it has brought six non- automotive players under its ambit, including a few startups, which I am certain would lead to competition intensifying in the automotive space. The list of champion component manufacturers is yet to be released, and is likely to have many global majors that would certainly look at India for the large-scale production of advanced automotive technology products.
While an incentive of up to 18% of determined sales value will be able to compensate for disabilities faced by the industry in providing an attractive value proposition to investors, I am also happy to note that under the champion OEM scheme, applicants are proposing investments to the tune of ₹45,016 crore over the next 5 years, thereby giving a major impetus to overall investment in India.
The ministry of heavy industries has been very accommodative of requests by the industry and had engaged in wide consultation to ensure the PLI scheme is designed to make the industry future-ready, grow in scale and size, and move up the value chain to make India a hub for manufacturing high-end advanced technology auto components. The scheme will support the cause of an Atmanirbhar Bharat (self-reliant India) and also help the country become a strong player in global automotive value chains, with India’s share in the world’s auto trade expected to rise from a meagre 1.5% today.
The government has delivered on its promise of providing appropriate policy support for the sustainable growth of our auto industry, whose response has been very enthusiastic.
The current policies of the government, especially those focused on the auto sector, will revolutionize manufacturing in India, marking the dawn of a new era for our automotive industry. They have set the ball rolling for the next few decades, with large investments being aimed at high-end and advanced value addition, technology development and advancements in the production of greener and cleaner vehicles.
Vikram Kirloskar is chairman, SIAM Passenger Vehicle CEOs Council and vice chairman, Toyota Kirloskar Motor Pvt Ltd
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