Auto firms welcome PLI scheme as sector gets lion's share of incentives

Rs 57,000 cr provided to auto components and automobiles, as compared to other sectors like advanced cell chemistry battery, pharma, food products, and white goods

The beleaguered auto sector which has been reeling from shock of a demand slowdown, welcomed the Performance Linked Incentive (PLI) push to the sector.

The maximum incentive of about Rs 57,000 crore was provided to the auto component and automobile sector, as compared to other sectors like advanced cell chemistry battery, pharma, food products, and white goods.

The Automobile Industry in India contributes 7.1 per cent to the country's GDP and around 49 per cent to India's manufacturing GDP as of 2019. It became the fifth-largest auto market in 2019 with sales reaching 3.81 million units. The automobile industry is one of the largest employment providers in the country and employs close to 29 million people across the country.

“This will enable auto Industry to be a part of the Global Value Chain with an allocation of Rs 57,000 crores, over the course of next 5 years. We thank the Government of India for echoing its confidence on the Indian Automobile industry, as the industry was eagerly awaiting for this scheme to increase its competitiveness and take the growth of the sector to the next level,” said Kenichi Ayukawa, CEO, Maruti Suzuki India.

Society of Indian Automobile Manufacturers (SIAM) had earlier warned that the slowdown, complicated by the pandemic, will hit fresh investment and lead to job losses. The scheme would help the industry to turn that around and attract fresh investment.

Foreign automobile companies have contributed to the development of the industry ecosystem leading R&D activities, exports, and new product introductions, and introducing latest technologies into the sector through technology transfer.

For instance a foreign player like Hyundai has led in the exports of passenger vehicles exporting 145,000 units during the period of April-December 2019 and Toyota plans on investing close to Rs 2,000 crore for the development of electric components and technology. Daimler has invested heavily in R&D and has achieved 90 per cent localization of the products it manufactures in India under the Indian brand Bharat Benz.

“Production linked incentives help in localizing manufacturing and promoting greater levels of indigenization from a supply chain standpoint. The announcements will help attract greater investments in the food industry which is a critical driver of employment and will also have a cascading impact on agriculture and allied sectors,” said Anand Ramanathan, partner, Delloite India.

Auto component manufacturers said that the incentives will help the sector to become reduce import and become net-exporter.

“The announcement of the approval of the PLI (Production Linked Incentive) Scheme for the auto & auto component sector is indeed a very welcome step to make the industry ‘Atmanirbhar’ and globally competitive. We are  hopeful that the outlay announced will encourage the industry to become net-exporter and help reduce import dependence. We eagerly await the detailed  contours of the scheme for the auto and auto component sector,” said Deepak Jain, president of Auto Component Manufacturers Association of India.