The Ministry of Heavy Industries has announced a significant acceleration in the disbursal of incentives under the Production-Linked Incentive (PLI) scheme for the automotive sector, reaching approximately ₹2,000 crore in the current fiscal year (FY26), with an additional ₹40-50 crore slated for release by February. This substantial financial injection marks a pivotal moment for India’s manufacturing ambitions, signaling a robust commitment to fostering domestic production, particularly in advanced automotive technologies and components. The scheme, launched in 2021 with an impressive outlay of ₹25,938 crore over five years, is designed to enhance India’s global competitiveness in the automotive and auto component industries, positioning the nation as a formidable player in the evolving landscape of mobility.
This year’s disbursements represent a dramatic increase from the initial phase, where a cumulative ₹322 crore was allocated to four pioneering companies – Tata Motors, Mahindra & Mahindra, Ola Electric, and Toyota Kirloskar Auto Parts – in the scheme’s inaugural year (FY25). The latest round of incentives has expanded its reach, benefiting nine companies, comprising five prominent vehicle manufacturers and four critical component makers. The list of beneficiaries now includes industry stalwarts like Tata Motors, Mahindra & Mahindra, Bajaj Auto, TVS Motor Co, and the rapidly growing electric vehicle manufacturer Ola Electric. On the component front, Delhi-TVS Technologies, Sona BLW Precision Forgings (Sona Comstar), Bosch Automotive Electronics, and Tata Autocomp Systems have successfully met the stringent eligibility criteria, underscoring the scheme’s dual focus on integrated manufacturing capabilities.
Beyond direct financial incentives, the PLI scheme has proven instrumental in catalyzing substantial capital investments across the automotive ecosystem. The ministry reported that investments totaling ₹35,657 crore have already materialized in the second year of the scheme, nearing the ambitious target of ₹42,500 crore. This rapid mobilization of capital underscores the private sector’s confidence in India’s manufacturing potential and the government’s policy support. Officials note that a significant portion of these investments were strategically front-loaded in the initial years, a common pattern in large-scale industrial projects where infrastructure and production facilities require immediate capital outlay. The expectation is that while investment rates may stabilize or taper slightly in subsequent years, the focus will shift towards maximizing output and scaling sales, particularly for zero-emission vehicles, which are poised for exponential growth.
The selection process for the PLI scheme was rigorous, initially shortlisting 82 companies. To date, 18 of these have successfully navigated the stringent investment and localization benchmarks, qualifying for incentives. This selective approach ensures that only companies demonstrating genuine commitment to domestic manufacturing and value addition are rewarded. However, the ministry has also indicated a firm stance on non-compliance, stating that bank guarantees of 10 component manufacturers who have not initiated any investments will be invoked. This action highlights the government’s commitment to accountability and ensuring that public funds are utilized effectively to achieve policy objectives, preventing speculative participation.
Industry experts, while acknowledging the positive momentum, also highlight the long road ahead. Sharif Qamar, Associate Director of Transport and Urban Governance at The Energy and Resources Institute (TERI), pointed out that the total disbursal over the first two years constitutes approximately 10% of the scheme’s overall budget. This pacing, while showing significant growth in FY26, suggests that a substantial increase in the sales of electric vehicles (EVs) and advanced automotive products will be critical to ensure the complete utilization of the allocated budget within the remaining three years. "This momentum needs to be maintained to achieve complete disbursement of the allocated budget," Qamar emphasized. He further noted the inherent challenges, particularly the need for a careful and targeted approach to technology support. Qamar advocated for a sharper focus on clean technologies and active safety features, ensuring that India’s automotive sector evolves not just in volume but also in technological sophistication and sustainability.
The scheme’s emphasis on domestic value addition (DVA) is a cornerstone of its strategy to build a resilient and self-reliant automotive supply chain. Products must meet a minimum DVA of 50% to qualify for incentives, a criterion designed to stimulate local manufacturing, reduce import dependence, and foster a robust ecosystem of ancillary industries. So far, eight vehicle manufacturers and ten component makers have successfully met this criterion for 131 distinct products. This policy has had a profound impact on thousands of micro, small, and medium enterprises (MSMEs) that form the backbone of the automotive supply chain, enabling them to integrate more deeply into the manufacturing process and benefit from increased demand for locally sourced components and materials. This cascade effect not only creates jobs but also disseminates technological know-how across the broader industrial base.
Looking ahead, the government’s budget allocation for the next fiscal year (FY27) is anticipated to be around ₹5,500 crore for the PLI-auto scheme, signaling a continued ramp-up in support. This projection aligns with the expectation that as more companies meet the eligibility criteria and production scales up, the demand for incentives will naturally increase. The global automotive industry is undergoing a transformative shift towards electrification, automation, and sustainable manufacturing. India’s PLI scheme is strategically positioned to leverage these trends, aiming to attract global players, foster indigenous innovation, and make the country a hub for future mobility solutions. The focus on localizing critical components, from advanced battery systems to complex electronic control units, is crucial for securing supply chain resilience and reducing vulnerability to global disruptions.
The scheme’s success is not merely measured in financial disbursals but in its broader economic impact. It is expected to generate significant employment opportunities, both direct and indirect, across manufacturing, R&D, and services sectors. By fostering a competitive manufacturing environment, it aims to enhance India’s export capabilities, allowing domestically produced vehicles and components to compete effectively in international markets. Furthermore, the push for advanced automotive technologies, especially in electric vehicles, aligns with India’s broader climate goals and commitment to reducing carbon emissions. However, realizing the full potential of the PLI scheme will require sustained policy support, continuous dialogue between the government and industry stakeholders, and adaptive strategies to address evolving market dynamics and technological advancements. This includes investing in charging infrastructure for EVs, providing consumer incentives, and addressing the skill gap in emerging automotive technologies to ensure a holistic transition towards a modern, sustainable, and globally competitive automotive industry.
