India’s automobile industry is one of the largest in the world, but it faces challenges that prevent it from reaching its full potential. High costs, limited economies of scale, and an incomplete supply chain often slow growth. To address these issues and strengthen the sector, the Government of India introduced the Production Linked Incentive (PLI) Scheme for the Automobile and Auto Components industry.
With a budget of ₹26,058 crore and a clear focus on advanced automotive technologies, the scheme aims to encourage investment, boost exports, and generate employment under the Atmanirbhar Bharat initiative. It covers both vehicle manufacturers (OEMs) and auto component manufacturers, with incentives linked to performance over a five-year period starting from FY 2022–23.
This blog explains the scheme’s structure, eligibility, investment requirements, incentive rates, and conditions — offering a clear picture for companies looking to benefit from it.
Background of the Scheme
The PLI Scheme for the automobile sector is a central government initiative governed by the Ministry of Heavy Industries (MHI). Its primary goal is to:
- Overcome cost disadvantages
- Create economies of scale
- Build a robust supply chain in advanced automotive technologies
The scheme encourages the industry to move towards high-value, technology-driven products such as electric vehicles, hydrogen fuel cell vehicles, and other advanced automotive technology (AAT) products.
It is divided into two main parts:
- Champion OEM Incentive Scheme — for original equipment manufacturers producing vehicles
- Component Champion Incentive Scheme — for manufacturers of advanced auto components
Both schemes run for five consecutive years (FY 2022–23 to FY 2026–27). Incentives are tied to incremental sales performance and new domestic investments.
1. Champion OEM Incentive Scheme
This part of the scheme applies to both existing automobile OEM manufacturers and new non-automotive investors (NNAIs) entering the sector.
A. Eligibility Criteria
For existing companies:
- Minimum global group revenue: ₹10,000 crore in FY 2020–21
- Group global investment in fixed assets (gross block): ₹3,000 crore as of 31 March 2021
For NNAI companies:
- Minimum global group net worth: ₹1,000 crore as of 31 March 2021
An “existing company” means a business with an established presence in manufacturing vehicles or components in India or globally. An NNAI is a company or group with no revenue from automobile or auto component manufacturing as of 31 March 2021.
B. Minimum New Domestic Investment Condition of Performance
Cumulative new domestic investment to be achieved (₹ crore):
| Year | Existing Companies (Except 2W & 3W) | Existing Companies (2W & 3W) | NNAI |
| Up to 31 Mar 2023 | 300 | 150 | 300 |
| Up to 31 Mar 2024 | 800 | 400 | 800 |
| Up to 31 Mar 2025 | 1,400 | 700 | 1,400 |
| Up to 31 Mar 2026 | 1,750 | 875 | 1,750 |
| Up to 31 Mar 2027 | 2,000 | 1,000 | 2,000 |
Investments must come from the same legal entity applying for the incentive, and only investments made on or after 1 April 2021 will count. Eligible investment includes expenditure on plant, machinery, equipment, tools, and certain building costs (up to 10% of the minimum investment). Land costs are excluded.
C. Eligible Products
- Battery electric vehicles (meeting FAME-II performance criteria)
- Hydrogen fuel cell vehicles
- Any other advanced automotive technology vehicle prescribed by MHI
- Applicable to all segments, including 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles, tractors, and military-use automobiles
D. Incentives Offered
- Minimum threshold Determined Sales Value (DSV) in first year: ₹125 crore
- Minimum 10% year-on-year growth in DSV required to continue receiving incentives
- Incentive rates:
- ≤ ₹2,000 crore DSV: 13%
- ₹2,000–₹3,000 crore: 14%
- ₹3,000–₹4,000 crore: 15%
- ₹4,000 crore: 16%
- Additional 2% for cumulative DSV exceeding ₹10,000 crore over five years
2. Component Champion Incentive Scheme
This covers manufacturers of advanced automotive technology components, CKD/SKD kits, and vehicle aggregates.
A. Eligibility Criteria
For existing companies:
- Minimum global group revenue: ₹500 crore in FY 2020–21
- Group global investment in fixed assets: ₹150 crore as of 31 March 2021
For NNAI companies:
- Minimum global group net worth: ₹1,000 crore as of 31 March 2021
B. Minimum New Domestic Investment Condition of Performance
Cumulative new domestic investment to be achieved (₹ crore):
| Year | Existing Companies | NNAI |
| Up to 31 Mar 2023 | 40 | 80 |
| Up to 31 Mar 2024 | 100 | 200 |
| Up to 31 Mar 2025 | 175 | 350 |
| Up to 31 Mar 2026 | 220 | 440 |
| Up to 31 Mar 2027 | 250 | 500 |
The same investment rules apply as in the OEM scheme — only specified capital expenditures count, and land is excluded.
C. Eligible Products
- Pre-approved advanced automotive technology components
- CKD/SKD kits
- Vehicle aggregates (chassis, engines, transmissions, suspensions, steering, wheels, brakes, seats, etc.)
- Any other advanced components prescribed by MHI
D. Incentives Offered
- Minimum threshold DSV in first year: ₹25 crore
- Minimum 10% year-on-year growth in DSV required for continued eligibility
- Incentive rates:
- ≤ ₹250 crore DSV: 8%
- ₹250–₹500 crore: 9%
- ₹500–₹750 crore: 10%
- ₹750 crore: 11%
- Additional 2% for cumulative DSV above ₹1,250 crore over five years
- Additional 5% for components of battery electric or hydrogen fuel cell vehicles
Common Conditions
- Minimum 50% domestic value addition is required, as per FAME scheme methodology, certified by an MHI-approved testing agency.
- DSV is calculated as current year sales of eligible products minus base year sales (FY 2019–20; for NNAI, base year sales are zero).
- Missing the investment or DSV growth threshold in any year means no incentive for that year, but eligibility can be regained the following year if targets are met.
- Early fulfilment of investment conditions is allowed.
- Incentive claims must be filed annually within six months of the end of the financial year.
Evaluation Criteria
- Companies can apply for incentives under both OEM and component schemes but cannot claim incentives twice for the same product.
- Preference is given to companies front-loading their investments.
- Applications must be submitted within 60 days of the notice inviting them, with all supporting documents and a non-refundable fee.
- Incentives can also be claimed for vehicles with advanced chemistry cell (ACC) batteries that have received incentives under the PLI-ACC scheme.
Final Thoughts
The PLI Scheme for the automobile and auto components sector is more than a subsidy program — it’s a roadmap for transforming India into a global hub for advanced automotive manufacturing. By rewarding performance and encouraging investment in cutting-edge technology, it pushes companies to innovate while building a stronger domestic supply chain.
For both established manufacturers and new investors, the scheme offers a rare opportunity to scale operations, tap into global markets, and be part of India’s shift towards sustainable, high-value automotive production.
