How India's mega plan to boost auto production sputtered

Subscribe to enjoy similar stories. Four years since India flagged off an ambitious scheme to encourage the local production of automobiles, the ₹26,000-crore venture is yet to gain traction. The production-linked incentive (PLI) scheme for automobiles and components (PLI-Auto) was announced in 2021, but the first payouts happened only in January this year.

For FY26, the government expects incentives to make up only 12% of the overall ₹2,818.85 crore allotted to the scheme, showed data from the Centre's Outcome Budget, which sets targets for outcomes of various schemes. That would make it the second year the scheme's disbursals will be only a small share of the funds allocated. The scheme, which runs till FY29, promises incentives for producing advanced automotive technology, including electric vehicles and fuel cell vehicles.

However, stiff targets for revenue, investments and local value addition have made it hard for many companies to qualify for incentives. Policy changes and supply chain challenges have further contributed to the scheme's slow progress. EV makers say they are facing challenges due to policy uncertainty on manufacturing and adoption of zero-emission vehicles.

"The PLI-Auto scheme aims to boost incremental production and sales; however, most companies face challenges such as supply chain disruptions, regulatory delays, and cautious investment due to frequent changes in fiscal EV policies. Notably, three EV policies were introduced in calendar year 2024, adding to the uncertainty, complexity and inconsistency," said Alok Rai, director, public affairs, Society of Manufacturers of Electric Vehicles, an industry body. Also read | The case for subsidizing electric vehicles The policies mentioned are the