Analysts laud auto PLI scheme, see rapid adoption of e-vehicles
The Centre’s ~26,000-crore production-linked incentive (PLI) scheme will lay a strong foundation for rapid adoption of electric vehicles (EVS) in India, believe analysts. It will especially give a fillip to twowheeler manufacturers, they say.
On Wednesday, the Union Cabinet approved the scheme with a budgetary outlay of ~25,938 crore to boost domestic manufacturing capabilities of the automotive industry, including electric and hydrogen fuel cell vehicles.
The scheme will come into effect from financial year 2022-23 (FY23) for five years and the base year for eligibility criteria would be FY20.
To avail of the scheme, original equipment manufacturers (OEMS) should have a minimum of ~10,000 crore in revenue and ~3,000 crore investment in fixed assets and auto component makers should have minimum revenue of ~500 crore and ~150 crore investment in fixed assets.
Reacting to the development, the Nifty Auto Index climbed 0.5 per cent on Thursday with stocks such as Bosch and Tube Investments of India (up 5 per cent each), Hero Motocorp (1.7 per cent each), Bajaj Auto (0.84 per cent), and Eicher Motors (0.7 per cent) leading the rally.
Here are some analysts’ views on the scheme:
Motilal Oswal Fin Svcs
Incentives offered under this scheme are very attractive and linked to the level of incremental determined sales of advanced technology vehicles/products in both the domestic and export markets. We believe the eligibility criteria on both revenues and expected investments over five years are very reasonable, ensuring eligibility for most of the OEMS and component manufacturers.
“While the incentives offered under the auto PLI scheme are lower than the originally planned incentive of ~57,000 crore, we believe it is well directed to improve competitiveness in the nascent segment,” the brokerage said.
Kotak Securities
After the FAME-II policy and PLI scheme for advanced chemistry cell (subsidy for batteries manufactured in India), the PLI scheme for auto provides incentives in the range of 13-18 per cent of sales value to OEMS for manufacturing EVS in India, which is very attractive, the firm said.
Antique Broking
The scheme promotes cleaner technologies as OEMS will be incentivised to manufacture EVS and fuel cell electric vehicles (FCEVS). However, faster transition from internal combustion engine (ICE) vehicles to EVS is a negative for traditional OEMS, the brokerage said.
Geojit Financial Services
The timing of the scheme has to be seen in the context of investment leaving China because of the regulatory crackdown there. India is firmly on the road to become part of the global supply chain for the industry, said the firm.
ICICI Securities
The scheme provides a clear direction that policymakers remain focussed on promoting EVS. However, on the component side, a list of 22 advanced technologies (details awaited) have been identified for aggressive localisation in India. Various OEMS have raised concerns on ICE vehicles being excluded from the incentives scheme, the brokerage said.