The Ministry of Heavy Industries (MHI) has proposed doubling the allocation for the Production Linked Incentive (PLI) scheme for automobiles and auto component manufacturers to ₹5,800 crore in the upcoming financial year. The scheme had received ₹2,818.85 crore in FY 2025-2026.
The PLI auto scheme proposes financial incentives to boost domestic manufacturing of advanced automative products and attract investments in the automotive manufacturing value chain.
It incentivises local production of only those products that achieve a domestic value add (DVA) of 50%. The scheme was focused on zero emission vehicles (ZEVs), i.e., battery electric vehicles and hydrogen fuel cell vehicles. The scheme was announced in 2021, but FY 2023–24 was the first performance year, and an amount of ₹322 crore was disbursed to four approved applicants in FY 2024–25. For the performance year 2024–25, a total amount of ₹1,999.94 crore had been disbursed for five approved applicants.
Looking ahead, the target allocation for FY 2027–28 is nearly ₹8,000 crore, increasing to ₹9,500 crore in the fifth year, a senior government official said. These allocations are aimed at achieving the total outlay of ₹25,938 crore as defined when the scheme was launched in 2021.
Explaining the rationale behind seeking doubling of allocation, the official said that in the initial years, the OEMs were focused on setting up manufacturing plants, which required substantial capital investment. Now, in the third year of the scheme, the focus would be on ramping up production output. As the scheme is production-linked, higher output levels necessitate a corresponding scale-up in incentives.
Government officials hold the opinion that the scheme has been “very successful” as it has enabled creation of more than 100 products, enabling more EV options for buyers. A total of 94 variants produced by eight automakers including Mahindra & Mahindra, Bajaj, Tata Motors, Ola Electric, and Hero MotoCorp are being supported, and 37 variants by 10 component companies are also being supported. The companies include Toyota Kirloskar Auto Parts, Bosch Automative Electronics India, and Cummins Technologies.
Due to the scheme a cumulative investment of ₹35,657 crore and cumulative determined sales of ₹32,879 crore has been achieved till September 30, 2025, according to a press statement from the Ministry of Heavy Industries.
In response to concerns by some electric two-wheeler (e2w) OEMs such as Ather Energy that the scheme does not support start-ups, the official quoted above said that the industry could make a representation and the government may consider a separate PLI scheme for start-ups and small scale enterprises.
