Indian automakers don’t need PLI: Bernstein writes to PM Modi

Foreign brokerage Bernstein has called for an end of the production-linked incentive (PLI) scheme for automobiles, stating that cash-rich Indian auto original equipment makers (OEMs) are purchasing battery packs and cells from China instead of investing in it.

“Auto OEMs do not need PLI — they are cash-rich and should be held responsible for driving the transition — and in any case even the leading OEMs are only purchasing battery packs/cells from China instead of investing in R&D and capex,” Bernstein said in a letter addressed to Prime Minister Narendra Modi.

The government should consider taking stakes in cash-rich companies who solicit PLI in the future, the brokerage said.

The government’s ₹25,938 crore production-linked incentive (PLI) scheme for the auto and auto component industry was aimed at boosting domestic manufacturing of battery electric vehicles.

Bernstein also called for a clear phase-out timeline for internal combustion engine (ICE) vehicles, batting for an incremental hike in taxes on such vehicles.

“Incentives should shift away from production-linked benefits for capital-rich incumbents toward demand-side support that allows new entrants to compete, provided they meet localization thresholds,” the foreign brokerage noted.

“A gradual increase in taxes on ICE vehicles, alongside stronger incentives for EV adoption, would create a credible transition pathway,” it said.

Bernstein said that electrification should also extend to household energy use, particularly cooking, to reduce reliance on imported LPG. “Energy security cannot be achieved without reducing both import dependence and structural inefficiencies in the power system,” it said.