The Production Linked Incentive (PLI) Scheme for the Automobile and Auto Components Industry is a flagship initiative launched by the Government of India to catalyze domestic manufacturing of Advanced Automotive Technology (AAT) products. Administered by the Ministry of Heavy Industries (MHI), the scheme is designed to overcome cost disabilities, foster economies of scale, and build a resilient supply chain in the automotive sector.
Core Objectives
- Boost Domestic Manufacturing: Incentivize the production of high-value AAT products within India.
- Enhance Value Addition: Encourage the transition to higher value-added products and reduce import dependence through a 50% Domestic Value Addition (DVA) requirement.
- Employment Generation: Create high-quality direct and indirect jobs across the manufacturing, R&D, and supply chain sectors.
- Global Integration: Integrate the Indian automotive industry into the global supply chain, positioning the country as an export hub.
- Technology Adoption: Facilitate a shift toward sustainable mobility solutions like Electric Vehicles (EVs) and Hydrogen Fuel Cell Vehicles (HFCVs).
Scheme Structure and Outlay
The scheme has a total budgetary outlay of INR 25,938 crore and is operational for a period of five consecutive financial years, beginning from FY 2023–24. It is bifurcated into two primary incentive components:
1. Champion OEM Incentive Scheme
- Target: Applicable to Battery Electric Vehicles (BEVs) and Hydrogen Fuel Cell Vehicles (HFCVs) across all segments, including two-wheelers, three-wheelers, passenger vehicles, commercial vehicles, tractors, and military-grade automobiles.
- Incentive Mechanism: Sales-value-linked incentives based on incremental sales over the base year.
2. Component Champion Incentive Scheme
- Target: Applicable to Advanced Automotive Technology components, completely-knocked-down (CKD)/semi-knocked-down (SKD) kits, and vehicle aggregates.
- Incentive Mechanism: Incentivizes the production of critical components that meet specific technological benchmarks.
Eligibility Criteria
Eligibility is determined based on financial strength and committed investment.
| Category | Global Group Revenue | Global Investment (Fixed Assets) |
| Auto OEM | Minimum ₹10,000 crore | Minimum ₹3,000 crore |
| Auto Component | Minimum ₹500 crore | Minimum ₹150 crore |
- New Non-Automotive Investors: Companies with no prior revenue from automotive manufacturing can also qualify if they possess a minimum global net worth of ₹1,000 crore and provide a clear investment plan for India.
- Domestic Value Addition (DVA): A mandatory 50% DVA is required for products to qualify for incentives, ensuring that a significant portion of manufacturing happens locally.
Incentive Slabs
The incentive structure is progressive, rewarding higher sales volumes.
| Determined Sales Value (DSV) | Incentive (% of DSV) |
| Up to ₹2,000 Crore | 13% |
| ₹2,000 – ₹3,000 Crore | 14% |
| ₹3,000 – ₹4,000 Crore | 15% |
| Above ₹4,000 Crore | 16% |
- Additional Benefits: An extra 2% incentive is provided for reaching cumulative sales thresholds (e.g., ₹10,000 crore for OEMs; ₹1,250 crore for components over 5 years). An additional 5% is available for specific EV and Hydrogen components.
Progress and Impact (As of Dec 2025)
- Disbursements: As of March 2026, the government has disbursed over ₹2,377 crore in incentives to the automobile sector.
- Investment & Sales: The scheme has successfully attracted cumulative investments exceeding ₹35,000 crore, with substantial incremental sales reported by participating companies.
- Employment: Over 48,000 jobs have been generated directly and indirectly under this scheme.
- Certification: Dozens of variants from both OEM and component manufacturers have received DVA certification, validating the indigenization efforts.
Challenges and Strategic Outlook
Despite its successes, the scheme faces implementation hurdles. The high 50% DVA requirement remains challenging due to limited domestic availability of critical components like battery cells and rare earth magnets. Furthermore, the high investment thresholds have historically deterred smaller firms and startups. As of 2026, the government is continuously evaluating the scheme to rationalize norms and align them with the dynamic needs of the green mobility transition, ensuring that India remains a competitive manufacturing destination.
Last Modified: June 1, 2026