Automotive industry: view: Here’s how the automatic PLI scheme could give the industry the right boost
In view of these developments, the automotive sector will see significant investments in these areas of advanced automotive technology (AAT). GoI recognizes that the Indian market may be currently undersized in these technologies. This is why India has a large capacity and cost incapacity gap. However, if we don’t close this gap now, we will miss out on the next decade of auto investment. In addition, India’s AAT value chain will remain weak.
Strengthening the competitiveness of TAAs will be a long-term structural change. But the start of this change will need a catalyst. This is what the automotive PLI program will do, to create new capabilities in the automotive equipment manufacturers (OEM) and supplier segments of the industry.
The goal of the PLI auto scheme will be to attract new investment in AAT. AAT is not limited to electric vehicles (EVs) but also includes automotive electronics, sensors, green technologies, safety technologies which can find application in electric vehicles as well as combustion engine vehicles. internal. The investments will result in growth in sales and production of AAT in India.
The LIP will provide incentives based on AAT’s sales growth to cover significant cost handicaps that may exist in these segments. The policy aims to encourage large-scale investment by OEMs and automotive component suppliers in India. It will also ensure the transfer and assimilation of these AATs by the automotive ecosystem in India.
The PLI program is open to existing automobile manufacturers as well as to non-automobile investors. Existing automakers with more than Rs 10,000 crore in global revenue and Rs 3,000 crore in gross assets will be eligible to apply for this program. It has two parts. One, the OEM Champions Incentive Program, in which a minimum AAT investment commitment of Rs 2,000 crore for existing four-wheel OEMs is to be met within the five years of the program. This criterion will be set at an investment commitment of Rs 1,000 crore for existing two and three wheel OEMs. Existing automotive component suppliers with more than Rs 500 crore in global revenue and Rs 150 crore in fixed assets will be eligible for this program.
Second, the Component Champions Incentive Program, in which existing component suppliers will be required to meet a minimum investment commitment of Rs 250 crore over five years.
Non-auto investors will need to demonstrate a net worth of over Rs 1,000 crore in order to apply for this program. In addition, they will have to meet a minimum AAT investment commitment of Rs 2,000 crore under the OEM champion part and Rs 500 crore under the component champion part, over five years of the program.
Each of the eligible participants will need to apply to be part of the PLI auto, along with a detailed plan on how it would meet the investment conditions and plans for growth in production and income. Companies with the most attractive investment and growth commitment will be prioritized based on a transparent assessment process. Eligible participants will receive an incentive of 8-18% of AAT product sales growth.
The automotive PLI is expected to generate nearly Rs 42,500 crore in new investment and generate production revenue growth of nearly Rs 231,500 crore. This will translate into direct and indirect employment opportunities for more than 7.5 lakh of people over five years.
The program can only be successful if industry leaders understand its context and intent with an open mind. They should look beyond the narrow lens of how it will only benefit their own businesses and watch the entire industry and economy prepare for the future.