Overview of PLI Scheme for Auto and Drone Industry

The Union Cabinet announced a Production Linked Incentive (PLI) scheme for the automotive and drone industry on Wednesday.

The Indian government with its vision of ‘Aatmanirbhar Bharat’ and giving a boost to manufacturing,  the centre has allocated a budget of Rs 26058 crore.

The PLI scheme will focus on Advanced Automotive Technology vehicles and products that are globally competitive and make India self reliant and improve the supply chain  in new automotive technology.

The scheme offers a slew of incentives to companies that will decrease the cost for those who want to invest in new technologies and scale it up.

The government expects the scheme will provide new jobs to over 7.6 lakh people. It said it estimates the auto sector to bring in fresh investments of over Rs 42,500 crore over the course of  five years and incremental production of over Rs 2.3 lakh crore.

Two Areas Of Focus

The PLI scheme for auto sector is bound to benefit both the existing automotive companies and new firms in automobile or automotive component manufacturing business.

The scheme has two component: Champion OEM Incentive Scheme and Component Champion Incentive Scheme.

The Champion OEM Incentive scheme is applicable to companies manufacturing Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments based on sales value.

The Component Champion Incentive scheme is applicable to companies manufacturing Advanced Automotive Technology components of vehicles, Completely Knocked Down (CKD) or  Semi Knocked Down (SKD) kits, Vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors.

Drone Industry

The PLI Scheme will also give a fillip to Drones and Drone components industry as this industry focuses on the strategic, tactical and operational uses of this revolutionary technology.

The scheme is product specific with clear revenue targets and focus on domestic value addition which are key to building capacity and important to India’s growth strategy as the government wants to make the country a manufacturing hub for drones.  

The government expects the PLI scheme will bring in investments worth Rs 5,000 crore, increase in eligible sales of Rs 1500 crore and create additional employment of about 10,000 jobs over a period of three years.

Industries' View On PLI Scheme

Some stakeholders were cautious in welcoming the move of the centre. Maruti’s chairman RC Bhargava said that the PLI scheme would lower the cost of production but will not create a market for automobiles based on new technologies.

Bajaj Auto’s managing director Rajiv Bajaj said that the PLI scheme stays clear of the earlier objectives of enhancing exports and employment.

However, chairman of TVS Motor, Venu Srinivasan said that the revised focus of PLI scheme on alternative fuels, electric vehicles and utilisation of advanced technological innovation, will help the industry move faster towards the future technologies.

Stocks Likely To Benefit

According to various brokerage reports, the companies’ stocks that have the potential to be benefited are Ashok Leyland, Balkrishna Industries, Bharat Forge, Bosch, Baja Auto, Endurance Tech, Jamna Auto, Minda Corp, Minda Industries, Motherson Sumi, Tata Motor, Tube Investments, Wabco, Pricol and Varroc Engineering.

TVS Group which manufactures a wide range of two-wheelers, three-wheelers and auto ancillary components stands to gain. Some of the TVS Group companies that are listed in the stock exchanges include TVS Motor, Sundaram Brake Lining, Sundaram Clayton, Wheels India and TVS Srichakra. 

Some of the above mentioned companies’ share price have already jumped after the PLI scheme was announced.