Ratings agency ICRA said the recently-announced production linked incentive (PLI) schemes will kick start investments in advanced auto technologies and enable the creation of a conducive electric vehicle system.
Indigenous supply chains
ICRA in its press release on Tuesday said that the PLI schemes endeavours to make the country future-ready and competitive in the global automotive arena. It does so by fast-tracking investments in technology and components where the country needs to leapfrog.
"It aims to promote indigenous global supply chain of advanced automotive technology products which is low compared to that globally. As tier-Is scale up, the tier-IIs will also benefit, resulting in a multiplier effect and cost competitiveness," the ratings agency said.
Competitive on the global front
The measures announced in the scheme bear the potential to make India an export hub in the global auto supply chain and increase cost competitiveness, ICRA stated.
Further, the scheme has the potential to attract foreign investments into India by capitalizing on global economics de-risking their supply chains, the ratings agency stated. "The production and export of advanced automotive components will also help compensate the potential loss of revenues from traditional components to an extent as overseas markets move into EVs in the future," said ICRA's Assistant Vice President and Sector Head Vinutaa S.
India has the potential to leapfrog from fossil-fuel based automobiles to green transportation
The ratings agency said the automotive sector has been one of the key beneficiaries of the PLI scheme.
It added that India has the potential to leapfrog from fossil-fuel based automobiles to green transportation with the current PLI scheme combining with erstwhile policies as FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicle-II), PLI for ACC batteries and the State EV policies. While the State EV policies would facilitate the demand side, the PLI scheme for ACC batteries would enable assurance on the supply side.
The Union Cabinet on September 15, cleared a production-linked incentive scheme worth Rs 26,058 crore aimed at amplifying automobile production in the country with a special focus on electric vehicles. Incentives worth Rs 26,058 crores would be provided over a period of five years.