India’s PLI Auto scheme sees modest start with ₹500 crore claims in FY24, industry anticipates surge by FY26

The first wave of claims for India's automobile production incentives scheme barely touched ₹500 crore, an amount that may grow exponentially in the years ahead as the electric revolution unfolds and more products secure certification.

Just four companies—Tata Motors, Mahindra Last Mile Mobility, Toyota Kirloskar Auto Parts (TKAP) and Ola Electric—submitted claims for FY24, two people aware of the matter said. The production-linked incentives (PLI) scheme for advanced automotive technologies, launched in 2021, has an ambitious outlay of ₹26,000 crore.

However, government officials and industry experts expect a surge in claims from FY26 as locally made electric cars and larger vehicles enter the market, likely using up the entire fund allocated for the scheme till FY28.

Tata Motors and Mahindra Last Mile Mobility have each submitted claims for close to ₹100 crore, the people cited above said on the condition of anonymity, adding disbursements are likely to begin by the end of the year. Queries emailed to the two companies as well as the ministry of heavy industries remained unanswered. 

The PLI scheme, which covers both automakers and component makers, was designed to stimulate production in advanced automotive and EV sectors by providing financial incentives to companies meeting set localization and sales criteria. So far, 81 companies have enrolled for the five-year scheme.

“The 50% domestic value requirement is essential to encourage local production, but it’s a high bar for component manufacturers, especially in the first year. Some manufacturers need more time to adjust their supply chains to comply fully,” an industry executive said on the condition of anonymity.

For smaller auto component makers, meeting the localization threshold is even more challenging, as they often rely on imported technologies, raw materials and subcomponents that can complicate compliance. Extensive audits and processes are to ensure compliance with rules.

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Tata Motors expects the disbursal of PLI funds to start in the ongoing quarter, chief financial officer P.B. Balaji said. “We are expecting that by Q3, we should have the first funds being released, which are rightfully due to us as per the PLI scheme, and then that gives us the ability to start accruals,” Balaji said in response to a Mint query at the company's quarterly earnings call. He added that the PLI incentives are expected to become a major funding source for Tata’s EV business from FY25.

So far, the automobile PLI has been steered by electric two-wheeler and three-wheelers, which represent the majority of the claims raised.

The incentives, calculated on a sliding scale based on annual sales, range from 13% for sales below ₹2,000 crore, to 16% for sales above ₹4,000 crore. Manufacturers achieving cumulative sales of ₹10,000 crore over five years are eligible for an additional 2% incentive.

For component suppliers and new non-automotive investors, the incentive structure is similarly tiered, with rates ranging from 8% to 11% based on sales, plus a cumulative incentive if they meet a ₹1,250 crore sales threshold. Components related to battery-electric and hydrogen fuel cell vehicles qualify for an additional 5% incentive, underscoring the scheme's emphasis on supporting clean energy technologies.

Despite the stringent criteria, industry executives believe the high potential incentive per unit could drive a wave of claims by FY26. “As electric cars, trucks, and more domestic EV components come into play, we foresee this funding to be fully utilized,” a second industry executive said, adding the scheme, though initially challenging, has significant financial benefits that will attract more manufacturers in the coming years.

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The government extended the scheme's eligibility period in response to applicants requesting more time to meet local manufacturing and sales requirements. Initially scheduled to end in FY27, the scheme now runs until FY28, allowing companies more time to ramp up production and localize supply chains to qualify for the full range of incentives.

Currently, the scheme’s managing agency, Industrial Finance Corp. of India (IFCI), is auditing the first set of claims. Companies expect the first disbursements to commence by the end of this fiscal year, after certification and techno-commercial audits are completed.

Despite the slow start, government and industry stakeholders are confident that the PLI scheme will eventually meet its goals of fostering advanced automotive technologies and increasing India’s share in the global EV market.