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Oct 21, 2021

India will be giving about $3.5 billion in incentives to auto companies over a five-year period under a revised scheme to boost the manufacturing and export of clean technology vehicles. With a lot of incentives that have come up for the automotive sector, the Viewpoint digs deeper into what makes this incentive different and how it promotes electric vehicles & hydrogen fuel-powered vehicles.

This scheme will definitely speed up investments done by global companies in India - Diego Graffi, Managing Director & CEO, Piaggio Vehicles

The intention is clearly for the government to push strongly for clean fuel technology. CNG, ethanol, etc, as far as my understanding goes, are definitely not included in this scheme. But technologies like fuel cell, hydrogen, etc are definitely very much involved. In my view, this scheme focuses on two aspects – one aspect is the investment done from the company into these kinds of technologies and the other aspect is the mechanism of incentive that is based on additional stage realised year after year. The global manufacturers are very much present in the Indian automotive space – most automotive players are doing business here. So, I think this scheme will definitely add a benefit in order to speed up and accelerate the investments done by global companies in India, which I think is one of the government’s intentions to launch this scheme i.e. to make India a global hub for production of vehicles exported also outside of India.

Recent policies are broader in spectrum in terms of technology & people it affects - Harshawardhan Wadikar, Head of Innovation – Product & Quality, Kosh Energy Technologies

We surely observe a firm commitment of the government towards cleaner technologies this time. Previous schemes under FAME-1 were perhaps a little ahead of their time, while recent policies are broader in spectrum in terms of both technology and the people it affects. The EV technology value chain is still young but is certainly evolving at a phenomenal rate. EV companies can be assured that the Indian government is willing to offset the cost of development of a superior and safer electric drivetrain. EV companies and their ancillary units like BMS/battery manufacturers can and rightfully should invest more in better functionality, control and design. The scale at which this scheme applies certainly calls for global players apart from Tata, Mahindra, such as Audi and Porsche, to announce their plans of launching and manufacturing in India. Minimum investment over five years and 10% growth in sales each year can yield incentives of up to 8-18% of the sales value of the vehicles or components.

Localisation is important to get the maximum benefit of this scheme - Maneesh Singh, VP - Strategic Development, DAO EV TECH

The key difference I see between this scheme and the policies that have been brought up in the past is that the previous schemes announced were more consumer-driven – they were more beneficial to end-consumers in terms of subsidy and other benefits. This scheme is leveraging renewable energy & electric vehicles. It has a direct benefit to the manufacturers; so, it is definitely a great move from the manufacturers’ standpoint. It’s going to attract all the global manufacturers as well as the local. Besides, it will boost the confidence of OEMs. Plus, localisation is important to get the maximum benefit of this scheme. All manufacturers will start eyeing India while the government is supporting to the fullest. So, even for the global players who are looking to invest in India, this is the right time.

This incentive will promote local manufacturers to foray into the development of new technologies - Akihiro Ueda, CEO and President, Terra Motors

This scheme primarily focuses to benefit EV manufacturers and low emission vehicle manufacturers, unlike previous schemes that were launched. This is in line with the government’s strategy to promote a clean and environment-friendly transport industry. The new scheme can help EV companies reduce the initial cost of vehicles to make them more competitive to fuel vehicles and can be utilised in R&D to develop cheaper, more charge-efficient batteries and can also be used in developing charging infrastructure in the country. I believe the idea here is that this incentive will promote local manufacturers to foray into the development of new technologies and parts as the demand for EVs rises. It will also momentarily serve as a temporary relief to EV manufacturers for the high import charges on parts. This is good news for global manufacturers as it is an economical relief for them.

The goal is to create global manufacturing champions in the country - Venkat Rajaraman, Founder& CEO, Cygni

It is envisaged that there will be a net savings of ₹200,000-250,000 crores on account of oil import bill reduction during the period of this programme due to EV adoption. Advanced Cell Chemistry (ACC) batteries manufactured under the programme is expected to accelerate EV adoption. The production linked scheme for ACC batteries is technology-dependent and varies with the cycle life of the battery. With higher energy density and higher cycle life, the incentive amount will be higher. These factors make this scheme very different from other schemes for auto companies. Plus, the goal is to create global manufacturing champions in the country and attract firms exploring a China-plus-one strategy for production. The plan is to set up a 50-Gigawatt hour (GWh) manufacturing capacity for advance chemistry cell batteries by attracting investments totalling ₹45,000 crores. The incentive will be paid out on the basis of sales, energy efficiency, battery life cycle and localisation levels. Such battery storages will cater not only to electric vehicles but also to the consumer electronics industry and electricity grids.

Image Gallery

  • Diego Graffi

    Managing Director & CEO

    Piaggio Vehicles

  • Harshawardhan Wadikar

    Head of Innovation – Product & Quality

    Kosh Energy Technologies

  • Maneesh Singh

    VP - Strategic Development


  • Akihiro Ueda

    CEO and President

    Terra Motors

  • Venkat Rajaraman

    Founder & CEO


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