Why EV startup Ather Energy approached PMO to 'reform' PLI-Auto scheme

Electric vehicle startups ushered in the EV revolution in India when legacy automakers were watching from the sidelines. But many of these new-age companies that laid the groundwork for electrification in the country have been kept out of the government’s ₹25,938-crore production-linked incentive (PLI) scheme for automobile and auto components.

The Auto PLI scheme, when it was announced in 2021, set a revenue threshold, allowing eligibility only for automakers whose global group revenue exceeded ₹10,000 crore. However, new non-automotive investors required a global net worth of at least ₹1,000 crore based on financials as of March 31, 2021, without any revenue barrier.

While Bhavish Aggarwal-led Ola Electric was a beneficiary under the second category, legacy automakers such as Tata Motors, Mahindra & Mahindra (M&M), Bajaj Auto, Hyundai Motor India, and TVS Motor Company qualified under the revenue category.

The application window for the PLI-Auto Scheme closed on March 31, 2021, when many of these startups were smaller in scale. The one-time window system also restricted new entrants, particularly newer startups, from accessing incentives.

As a result, startups like Ather Energy were left out of the scheme despite being among the first ones to launch a locally made electric vehicle.

To correct these anomalies, Startup Policy Forum, of which Ather is a member, has written to the Prime Minister’s Office, seeking a review of the existing Auto PLI scheme to make it more "inclusive" for startups that have been left behind. Startups argue that legacy players have done little to push the envelope in terms of electrification. EV penetration in two-wheelers has stagnated at around 5%. Startups argue that these numbers are falling short of the 2030 goals of EV adoption that Niti Aayog has set. PLI scheme also offers benefits on exports but nothing much has been done till now by established OEMs to initiate more EV exports.

The letter also bats for a multi-window framework for “inclusive” PLI, allowing both existing OEMs and new entrants to apply in separate tranches. This is expected to create a level-playing field and promote inclusive participation of startups and emerging innovative OEMs while also enhancing competition.

To lower entry barriers for early-stage companies that are critical to technological advancement but lack the scale of established OEMs, the letter has advocated for the introduction of reduced differentiated entry thresholds (turnover and fixed asset investment requirements) for startups and new-age deep-tech companies.

It also suggests disqualification of entities that fail to meet prescribed sales thresholds after acceptance from continued participation, thereby creating opportunities for players with sustained sales. The letter also advocates for linking PLI incentives to R&D, patent filings, IT creation and commercialisation of local technologies rather than just focusing on sales.

PLI incentives range between 13% and 16% of the “determined sales value” in a financial year. The scheme’s high revenue eligibility thresholds, rigid requirements, and incentive structures have concentrated benefits among large corporations.

Earlier in December, three EV startups, Ather Energy, Euler Motors and River Mobility, collectively wrote to the ministry of heavy industries to “reform” the ₹25,938-crore production-linked incentive (PLI) scheme for automobile and auto components.

In a LinkedIn post earlier this month, Ather Energy co-founder and CEO Tarun Mehta said the Auto PLI scheme is hamstrung by poor to nearly no startup participation. “Automotive PLIs have the potential to be the single biggest driver of global Indian leadership in EV 2Ws. However they are hamstrung by poor to nearly no startup participation. This needs to be solved for otherwise a policy to bring in new capacity and new innovation will end up punishing startups and end up with the reverse outcome,” he posted on the social network platform.

“As India moves beyond innovation in bits and celebrates startup success in the real world - hardware, drones, EVs and manufacturing - its reform of policies like this that will be the bellwether for how successful we will be,” Mehta added.

Mehta further said it is startups like Ather, River, Euler and many others that are pushing this innovation engine. “Eight year battery warranties, touch screens, OTAs, rapid charging, LFP batteries, frame motors, rare-earth free motors, infinite cruise - offerings pioneered by startups first. We are raising the stakes and this is what’s pushing legacy players to respond and catchup with their own products.”

Last week, Ola Electric received 366.78 crore under the Production Linked Incentive Scheme for Automobile and Auto Components for claims pertaining to 2024-25.