In order to increase the production of EV, the government’s productivity-linked incentive (PLI) program has accepted 50 of the 74 proposals it received from automakers. The 24 applications that are left are being processed.
The companies’ losses from producing EVs will probably be somewhat compensated by the approvals on Wednesday because of the current low numbers. Out of all the companies, Bajaj Auto is the only one that has received clearances for all 13 applications submitted for its three-wheelers and electric scooters, Chetak.
A government subsidy of 13–15% of the sales value of electric vehicles (EVs) can be awarded to an automaker under the PLI incentive program. An internal document detailing the status of DVA (domestic value addition) applications shows that Mahindra & Mahindra received approvals for 16 out of 23 applications, Tata Motors for 15 out of 27, Ola Electric for 4 out of 5, TVS Motor for 2 out of 5, and Eicher, who applied for 1 application, did not receive a permission.
Increasing overall revenue and partially offsetting the higher costs of implementing new technology, this usually closes the margin gap between internal combustion engines (ICEs) and electric vehicles (EVs).
Additionally, a business qualifies for an extra 2% of government assistance if its sales exceed INR 10,000 crore in the first five years of the PLI period.
EV Space PLI Scheme Benefits
The Pune-based Bajaj Auto reported in an investor call that it has accrued in the PLI benefits of the sales value in accordance with the scheme’s formula in its June quarter earnings. Similar to this, Ola Electric, which had four of its electric scooter models authorized by the program, is probably going to receive a 13–18% incentive of the sales value that was established.
As more and more goods receive PLI certification from regulatory bodies, these automakers will all be able to increase their profitability in the future to some degree.
However, we think that some benefits would be kept and others would be transferred to the final user. Due to competitive pricing, this will enable PLI-compliant items in gaining some market share, according to Dam Capital analyst Mitul Shah.
PLI plan was created to encourage automakers to invest in clean, advanced technology, lessen reliance on imports for new tech, and aid in the gradual expansion of manufacturing over the course of its five-year tenure beginning in 2023–2024. It was launched in September 2021 with a budget of INR 25,938 crore, with deep localization and domestic value addition of 50% as one of the most important criteria.
