India can make the most of its potential to become an integrated manufacturing hub for automotive global supply chains, shared senior government officials and the industry.

This comes after a day of the government approving the INR 25,938 crore production-linked incentive (PLI) scheme to promote the transition to advanced technologies.

The scheme, approved on Wednesday, is aimed at helping to hasten the move to electric and hydrogen fuel cell vehicles, which are expected to become popular in the coming years.

“In the last six months, many multinational corporations have announced plans to diversify their supply chains and invest in advanced automotive technologies. Now is the right time (to launch the PLI scheme) to get those investments to India.”

~Arun Goel, Secretary, Department of Heavy Industries.

Mr Goel said that the PLI scheme for the automobile sector, along with manufacturing advanced chemistry cells (INR 18,100 crore), announced earlier, and subsidies under the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) II initiative worth INR 10,000 crore, will make India attractive for setting up production hubs for advanced automotive technologies.

Currently, the share of advanced automotive technologies in the local automobile industry stands at around 3%, compared to 18% prevalent globally. The percentage of advanced auto technologies is projected to increase up to 30% by 2030.

The PLI scheme will greatly enable the industry to focus on developing higher value, higher technology products to transition to connected, clean vehicles to reduce dependence on imports and integrate with the global supply chain.

The Indian automotive industry had skipped a stage to leapfrog to BSVI emission norms last year but did not receive any support from the government at the time. While the PLI scheme does not “disincentivise” past investments, it underscores the Centre’s focus on reducing crude oil imports and promoting green mobility.

“The scheme will contribute towards reducing carbon emissions and oil imports with local manufacturing.”

~Kenichi Ayukawa, President, Society of Indian Automobile Manufacturers(SIAM)

A senior government official said India ranks 11th in the world in value terms, although it is the largest producer of two-wheelers, three-wheelers and tractors globally, and the fifth largest manufacturer of passenger and commercial vehicles. The PLI scheme is expected to help the industry successfully manufacture advanced auto tech products and evolve beyond mass-market low-value low tech ones. An additional focus area under the scheme is to deepen localisation and reduce imports.

Vikram Kirloskar, Vice-chairman, Toyota Kirloskar Motor, said the PLI scheme will give manufacturing a big boost in India. The incentive scheme will cut down imports and help the Indian automotive industry elevate its position in the value chain into higher value-added technologies.

The incentives offered over five years seek to attract more than INR 42,500 crore investment. The government expects this to generate INR 2.3 lakh crore of incremental production and 760,000 jobs.

Vipin Sondhi, Managing director, Ashok Leyland said that PLI has the potential to increase volumes substantially and will provide a huge opportunity for exports to grow.