Auto PLI adds force to the EV wave

September 22, 2021 6:30 AM

The quantum of benefit after this scheme would range from 34% to 65% of the sale price of EVs. Hence, the PLI scheme is likely to provide the required impetus to EVs

The public at large needs to welcome EVs and be patient with the glitches of the initial period, such as lack of variety, charging infrastructure-related challenges, etc. (Representative image)

By Saurabh Agarwal

We are in the middle of the biggest revolution in motoring, wherein India has set an ambitious goal of 30% battery electric vehicle (EV) adoption by 2030 and launched the national e-mobility programme. The government has rolled out an electric car fleet as a part of this programme to replace its existing fleet of petrol- and diesel-powered vehicles, indicating its commitment to clean mobility, and reduce both carbon emissions and the huge dependence on oil.

India has been pushing for low carbon-emission alternatives in the auto industry by laying down a framework and introducing policies that encourage EVs. New EV launches by automakers and government incentives such as FAME II, PLI for advanced chemistry cell (ACC) batteries, state subsidies to end-customers for purchase of EVs and lucrative state fiscal incentives reflect the steady progress of Indian EV industry.

Going a step further, the government, after much wait, has approved the PLI scheme for the auto sector, which predominantly includes green vehicles and advanced technology components. It includes two turnover-based schemes:

Champion OEM Incentive Scheme for OEMs of EV and hydrogen fuel cell vehicles (HFCV), wherein an incentive ranging from 13-18% is offered; and Component Champion Incentive Scheme for advanced automotive technology components used in two-wheelers, three-wheelers, passenger vehicles, commercial vehicles, tractors, etc, wherein incentive ranging from 8-13% is offered; with an additional incentive of 5% for the component manufacturers of EVs and HFCVs.

Given the focus statement of the government, i.e. ‘the future is electric’, it has been clarified that the benefits of auto PLI can be availed simultaneously along with benefits under FAME II, ACC PLI and any other central or state government incentive scheme (see graphic for an estimation of possible incentives that may be available to BEV manufacturers).

The quantum of benefit after this scheme would range from 34% to 65% of the sale price of EVs. Hence, the PLI scheme is likely to provide the required impetus to EVs.

Though the future of sustainable e-mobility looks bright, but the transition to EVs and other green vehicles is expected to be driven majorly by two/three-wheelers and CVs, and this would be a daunting task given the challenges associated. Faster EV adoption would require a three-way handshake between automakers, government and the public.

Automakers need to provide an EV alternate to every non-EV model in production and increase the affordability of EVs, by way of passing the incidence of incentives offered by the government; The government should provide support for infrastructure (especially charging) required to ensure end-to-end EV support and other policy changes for proper and safe disposal of such EVs;

The public at large needs to welcome EVs and be patient with the glitches of the initial period, such as lack of variety, charging infrastructure-related challenges, etc.

In a nutshell, there will likely be initial challenges, meeting which will require collaboration, accountability and acceptability of various stakeholders. But with government incentives and schemes, one can safely hedge the bet that EVs are here to stay.

The author is tax partner, EY India. Views are personal

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