Auto industry welcomes Rs 26,000 crore PLI-scheme but flags some concerns

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Stakeholders in the automotive industry appreciated the production-linked incentives (PLI) scheme for the sector announced on Wednesday but were measured in their evaluation of the scheme and its impact on the sector.

While the scheme will help reduce the cost of production of new products and technologies, companies still would have to evaluate several other factors including market demand for launching electric vehicles (EV) in the country,

Chairman R C Bhargava told ET.

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“The production linked incentive scheme makes introduction of new products and technologies less risky. But companies still have to look at other factors, look at economics. It (PLI scheme) doesn’t change the other parameters,” said Bhargava, adding, “For introducing a product in the market, companies have to keep in mind many considerations. PLI will help reduce the cost of production. Cost of production is one factor but not the only one.”

Earlier last month the country’s largest carmaker had indicated that it will not enter the EV segment in the short term.

“We (Maruti Suzuki) have said that we will introduce an electric vehicle when there is an adequate market. The PLI scheme doesn’t create a market for products. Price is one factor, there are many factors which determine if there is a market for a product,” Bhargava said.

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The government had first announced the scheme last year with a financial outlay of Rs 57,043 crore with plans to incentivise companies to build combustion engine vehicles and their components for export as well as domestic market, with some special benefits for EVs.

The plans were then changed to focus primarily on clean energy vehicles while the budget was pruned to Rs 25,938 crore.

“The revised focus of PLI scheme on alternative fuels, electric vehicles and utilisation of advanced technological innovation, will help the industry move faster towards the future technologies. There is a sense of haste in developing these technologies in India and this scheme gives the right impetus to the industry to move rapidly in that direction,” said Venu Srinivasan, Chairman, TVS Motor Company.

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Critics pointed out that the scheme doled out more incentives for clean vehicles, which already have many subsidies, while missing out on incentives for export-oriented companies manufacturing combustion engine vehicles and components thereof.

“The government’s PLI scheme in its new TLI – Technology Linked Incentive – avatar suggests that 18 months of dialogue with industry to enhance exports and hence employment is now history. That support has been now diverted to fuel futuristic e-scooters like the Chetak that are already entitled to a combined GST, FAME and State subsidy of Rs 1 lakh per vehicle – as also other such advanced vehicles, technologies and components – to fulfill their great responsibility with even greater subsidy,” Rajiv Bajaj, the managing director of Bajaj Auto said.

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