Budget Changes to Auto PLI Scheme May Ease EV Manufacturing Barriers: Deloitte

Deloitte Sees Scope for Wider EV Participation​

Potential changes to the Production Linked Incentive scheme for automobiles in the upcoming Budget could help remove key bottlenecks for electric vehicle manufacturers and enable broader participation in India’s green mobility transition, according to Deloitte.

Deloitte noted that sales momentum in the automobile sector is expected to continue into 2026, particularly for electric vehicles, which already benefit from a concessional GST rate of 5 percent. However, participation under the existing automobile PLI framework has remained limited.

Limited Success of Current Automobile PLI Scheme​

The automobile PLI scheme, introduced to promote advanced technology and zero-emission vehicles, has seen restricted uptake so far. Deloitte highlighted that out of more than 200 applicants, only a handful have qualified for incentives.

One of the primary challenges has been the requirement to achieve nearly 50 percent domestic value addition. This has proved difficult due to the lack of local manufacturing of critical components such as batteries and rare earth magnets. Despite certain relaxations introduced by the government, companies continue to struggle to meet the criteria as key inputs are not available domestically.

Investment Thresholds Remain a Key Hurdle​

Deloitte also pointed to the high investment requirements under the scheme as another major constraint. For the four-wheeler segment, companies are required to invest a minimum of Rs 2,000 crore over five years, along with year-on-year commitments.

Such thresholds pose challenges for many firms, especially smaller players and startups, given uncertainties around scaling up manufacturing operations. Deloitte indicated that revisiting these conditions could allow more applicants to benefit from the scheme, as seen in other PLI programmes.

Learnings From Other PLI Schemes​

In sectors such as electronics and pharmaceuticals, successive revisions to PLI schemes have expanded coverage and eased conditions, enabling a larger number of companies to participate. Deloitte said similar adjustments in the automobile PLI scheme could help improve outcomes.

The success of complementary initiatives, including the Advanced Chemistry Cell PLI scheme and the recently launched rare earth magnet PLI, was also highlighted as crucial for strengthening the domestic EV ecosystem.

GST Structure and Charging Infrastructure Challenges​

Deloitte further flagged concerns around the inverted duty structure faced by EV manufacturers, where inputs and components attract higher GST rates than the 5 percent levied on finished electric vehicles. Currently, GST refunds are allowed only on inputs and components, excluding capital goods and input services. Extending refunds to these areas could help ease cost pressures and improve competitiveness.

Public charging infrastructure services continue to attract an 18 percent GST rate. Deloitte noted that lowering this rate to 5 percent, in line with electric vehicles, could reduce charging costs and support wider adoption of electric mobility across the country.