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Government's productivity linked incentive (PLI) scheme for auto and auto component industry will benefit the electric vehicle (EV) segment immensely, especially the two-wheelers, which can see rapid adoption over the coming years providing incumbents an opportunity to step up their game.

According to an analysis done by Kotak Institutional Equities, along with FAME-II policy (subsidy for consumers) and PLI scheme for advanced chemistry cell (subsidy for batteries manufactured in India), the PLI scheme for autos provide incentives in the range of 13-18 per cent of sales value to OEMs for manufacturing EVs in India.

This in turn, the brokerage said, provides a strong foundation for rapid adoption of EVs in India as incentives now cover both manufacturers and consumers.

For auto component manufacturers, the government will provide incentives in the range of 8-13 per cent with additional 5 per cent incentive for manufacturers of battery cell and hydrogen fuel cell components. According to brokerages, key beneficiaries in the auto component space will be mostly global MNCs such as Bosch, Continental, Delphi Automotive, Denso Corporation.

Kotak said that in its own understanding, Minda Industries, Endurance Technologies, Varroc Engineering and Schaeffler India can benefit from this scheme.

The government has approved the PLI scheme for the auto industry with an outlay of Rs 26,400 crore, which has been slashed from the initial outlay of Rs 57,000 crore. The current PLI scheme is targeted to enable India to leapfrog to EVs and incentivise emergence of an advanced automotive technologies supply chain in India.

The PLI scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business. The scheme has two components, viz., Champion OEM Incentive Scheme -- 'sale value linked' scheme, applicable on BEVs and hydrogen fuel cell vehicles of all segments, and Component Champion Incentive Scheme -- 'sales value linked' scheme, applicable on advanced automotive technology components of two-wheelers, three-wheelers, passenger vehicles, commercial vehicles and tractors.

Under the scheme, 22 components will be eligible for incentives, which include flex fuel kit, hydrogen fuel cell, hybrid energy storage systems, electric vehicle parts, fuel injection systems, automatic transmission assembly and electronic power steering system, anti-braking system, advanced driver-assistance systems, among others.

The scheme will be effective from FY 2023 for five years and the base year for eligibility criteria would be FY 2020. A total of 10 OEMs, 50 auto component makers and five new non- automotive investors will benefit from the scheme. To avail the scheme, OEMs should have a minimum of Rs 10,000 crore in revenue and Rs 3,000 crore investment in fixed assets, auto component makers should have minimum revenue of Rs 500 crore and Rs 150 crore investment in fixed assets. New non-automotive investors must have a global net worth of Rs 1,000 crore and a clear business plan for investment in advanced automotive technologies to be eligible under the PLI scheme.