India’s Rs 26,000 Cr PLI auto manufacturing program precludes electric vehicle launches

The Indian government recently approved the Rs.25.938 billion allocation to give a boost to the Indian automotive sector, especially high quality vehicles and components with advanced automotive technology. However, the program is viewed as a mixed bag for India’s burgeoning EV startup ecosystem.

While it’s no secret that every cross-sector Production Linked Incentive (PLI) program has focused on scaling, for an emerging sector like electric vehicles, it stands to reason that the program needs to be more inclusive. If it doesn’t, the scheme will only have the stamp of input from legacy players, who were the very same players who previously pushed for EV plans to be slowed down.

The controversial topic in the PLI scheme is that to qualify, companies must have global consolidated sales of Rs 10,000 crore and two-wheel EV players must also invest Rs 1,000 crore over the next five years.

This is seen as a clear bias in favor of the legacy gamers who have actually been slow in making the switch. Startups in the pure two-wheeler world that Trickypedia spoke, pointed out that while the program will actually help increase production in India, much of it is aimed at attracting major global players to the country.

For reference, Ather Energy, which is one of the largest two-wheel EV manufacturers in the country and backed by Hero Electric, which is the country’s leading two-wheel EV manufacturer, had FY21 sales of Rs 79.8 billion.

“These are high numbers for aspiring two-wheeler EV companies. Very few young Indian companies will be eligible for, let alone benefit from, this program. The program will certainly be great for your Hyundais and Tatas, but unfortunately it does little to accommodate two-wheeler EV companies in India, “said a two-wheeler EV company founder on condition of anonymity.

The Society of Manufacturers of Electric Vehicles, India’s largest industry association representing EV companies, shared the same opinion. Sohinder Gill, the association’s general manager, said most of India’s current small and medium EV OEMs and new startups may not be eligible for the program.

“The program is particularly beneficial for existing large automotive players and new entrants as it will renew the interest of traditional players and motivate them to invest in the sector,” said Gill.

The program offers incentives for electric vehicles and hydrogen fuel cell vehicles of all segments as well as incentives for advanced automotive technology components of vehicles, CKD / SKD kits, vehicle assemblies for two-wheelers, three-wheelers, passenger cars, commercial vehicles and tractors …

The program doesn’t have much in terms of supporting the charging infrastructure in the country.

“One of the areas that requires special attention is the charging infrastructure segment. The charging infrastructure is not growing at the same pace as fleets (2W & 3W). In order to cover the need for charging infrastructure for 4-5 million 2-W and 3-W electric vehicles, the country needs around 100,000 charging points at a ratio of 1:50. We’re still a long way from that, ”said Krishna K Jasti, co-founder and CEO of EVRE.

“It is therefore important that the government actively look at this segment of the industry and provide it with adequate incentives to grow and meet the growing demand in this sector,” added Jasti.

Another EV manager pointed out the ambiguity in the wording of the program. “It is said that the group’s turnover should be Rs 10,000 billion to be eligible. Now does that mean Hero Electric, which has a stake in Other Energy, can apply with Other to qualify for the program? These are some questions that need to be answered, ”said this person.

Even the older FAME-II program, which provided Rs 10,000 crore as an incentive to stimulate demand for electric vehicles, had limited use by actual electric vehicle startups, leading the push to transform the markets. Profits under the latest program for these two-wheel EV startups, if any, would be indirect, said the people we spoke to.

Under the FAME II program, the government had allocated 756.66 billion rupees, of which only 53.27 billion rupees had been used as of June 2021. as per Government data.

Unsurprisingly, major automakers welcomed the government’s latest move.

“The revised focus of [the] The PLI program for alternative fuels, electric vehicles and the use of advanced technological innovations will help the industry move faster to the technologies of the future, ”said Venu Srinivasan, chairman of TVS Motor.

The Auto Industry Association Society of Indian Automobile Manufacturers (SIAM) said the program shows the government’s commitment to support the Indian auto industry by incentivizing battery electric and hydrogen vehicles and a select list of auto components while encouraging local investment and production.

The Automotive Component Manufacturers Association of India (ACMA), a group representing 850 manufacturers, said the PLI program will support India’s automotive value chain. “In addition, PLI will help India become an attractive alternative source of high-quality auto components as global economies reduce their supply chain risk,” said ACMA President Sanjay Kapur.

To update: The story has been updated with a comment from the co-founder of EVRE.

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