Only 16 of 84 firms qualify for auto PLI incentives, industry flags rare earth hurdles: Report

Despite the ambitious budget, actual disbursement under the PLI scheme has been far lower than expected.

India’s much-hyped production-linked incentive (PLI) scheme for automobiles and auto components has hit a major speed bump.

According to a Business Standard report, just 16 out of 84 eligible companies have met the mandatory Domestic Value Addition (DVA) requirements to claim incentives under the Rs 25,938 crore scheme, more than two years after its launch.

These firms have received approval for 107 models and component variants that met the required localisation criteria, based on data available till July 31. The scheme, which kicked off on April 1, 2022, was later extended by a year to March 2028.

What’s holding back incentive approvals?

The core issue is localisation. To qualify for incentives, companies must meet a minimum 50 percent DVA threshold. But achieving that target has proven difficult, particularly for electric vehicle (EV) makers that rely on imported components.

Making matters worse, China, a key supplier of rare earth materials used in electric motors, has tightened export restrictions. This has raised concerns across India’s EV ecosystem, with many manufacturers now urging the government to exclude electric motors from DVA calculations altogether, Business Standard reported.

Champion OEMs: Mixed bag of results

Only 7 of 20 EV manufacturers have cleared DVA criteria, despite 15 having models on the road

Among the 'Champion OEMs' category, which includes EV manufacturers for four-, three-, and two-wheelers, just seven of the 20 firms have received DVA clearance.

Surprisingly, this includes only four players in the four-wheeler category: Tata Motors, Mahindra & Mahindra, Eicher Motors, and Pinnacle Mobility. Major names like Suzuki, Hyundai, Ashok Leyland, Kia, and PCA Automobiles have not secured approval for any of their EV models yet, the BS report added.

This is despite 15 out of the 20 firms already having electric vehicles on Indian roads. Four firms in this group haven’t launched a single model.

Auto component makers lag behind

The component manufacturing side is facing even greater hurdles. Of the 64 companies eligible under the PLI scheme’s auto components category, just nine have met the DVA benchmark.

Business Standard notes that at least three companies did receive approval to make traction motors and wheel rims integrated with hub motors, but they’re now struggling with access to key rare earth materials following China’s export crackdown.

To attract greenfield investment, the government had also created a separate category for new non-automotive investors. But this too has seen limited uptake. Of the six companies in this bracket, only Ola Electric has received DVA clearance for any model.

Two-wheelers and three-wheelers shine

There’s one clear winner so far, electric two- and three-wheelers. In this sub-category, three of the four eligible companies (excluding Piaggio) have received DVA clearance for multiple models.

This segment appears to have cracked the localisation formula more efficiently, thanks to simpler supply chains and lower rare earth dependency.

PLI payouts: Big budget, small disbursals

FY25 allocation slashed by nearly 90 percent; just Rs 322 crore disbursed as of Dec 2024

Despite the ambitious budget, actual disbursement under the PLI scheme has been far lower than expected.

The Union Budget initially allocated Rs 3,500 crore for FY25, but revised estimates slashed this down to just ₹346.87 crore. As of December 2024, cumulative payouts under the scheme stood at Rs 322 crore, per a government release from March.

For FY26, the Centre has earmarked ₹2,818 crore, suggesting optimism, but whether the industry can meet the conditions in time remains to be seen.