A more flexible eligibility criteria for the Auto Production linked Incentive (PLI) scheme, allowing start-ups to take advantage of its benefits, will help meet its proposed manufacturing and localisation goals, OEMs and industry experts say.
Speaking to businessline, they note that the perception of start-ups being at an early-stage without industrial-scale manufacturing and hence not contributing to the scheme’s end goals, is unfounded. Electric-first startups have evolved as industry leaders both in production and sales while simultaneously making meaningful investments in R&D and future ready capability, they add.
Launched in 2021 with an outlay of ₹25,938 crore, the Auto PLI scheme aimed to boost domestic manufacturing in the auto and auto components sector including EVs, batteries, hydrogen fuel cell vehicles and other high-value parts. For auto OEMs to qualify for incentives under the scheme, they must have posted minimum group revenues of ₹10,000 crore from automotive manufacturing.
Despite facilitating more than ₹35,600 crore in investments, the companies are still falling short of localisation requirements and have not scaled up production to a level eligible for incentives.
A parliamentary panel had, earlier this year, recommended that the ministry of heavy industries (MHI) review eligibility conditions in the automobile production-linked incentive (PLI) scheme, to ensure domestic start-ups are not excluded.
Dinesh Arjun, co-founder & CEO of EV motorcycle startup Raptee.HV said that when the scheme was introduced in 2021, the EV ecosystem in India was still evolving. “You had two kinds of startups – genuine deep tech firms investing heavily in R&D and working towards building next gen capabilities domestically and low quality players who imported and assembled parts,” he said. He believes that the government, to restrict the incentives from such assemblers, made a blanket filter putting all startups under the category.
Unreasonable Eligibility threshold
Rakesh Kumar Ray, Manager – ICE & EV Powertrain Development & Testing, APL says that the policy must reward factors like innovation depth and real adoption rather than balance-sheet size.
“The EV transition has been driven as much by early conviction and category creation as by scale. Only incentivising scale risks penalising the innovators who de-risked the market, built indigenous tech, and proved commercial viability when penetration was less than 1 per cent,” he said.
Arjun says that a policy threshold that is built around absolute revenues, production and installed scale fails to address the nuance in the EV market. “Emerging EV segments, like electric motorcycles, are still tiny markets and startups, even if they drive category creation and dominate the market, cannot meet the absolute numbers,” he said.
Other notable EV start-up founders have also voiced their concerns over the exclusion.
Tarun Mehta, Co-founder and CEO, Ather Energy said in a post on X that startups are now investing hundreds, even thousands of crores manufacturing capacities for EVs, which exactly what PLI was hoping for as an outcome.
Meanwhile, multiple startup founders flagged a 13-16 per cent price disadvantage for EV startups as against legacy players due to the lack of PLI incentives.
“This 13-16 per cent could mean life or death for a startup. Over time, these risks distort competition in segments where startups are driving innovation and adoption,” Saurav Kumar, Founder and CEO at Euler Motors said on Linkedin.
Thiru Srinivasan, CEO – CAAR, Advanced Automotive Technologies said going forward, start-ups, who are incentivised, would be in a better position to innovate and push adoption rather than large incumbents who typically have an inclination to protect the status quo and transition more gradually.
Meanwhile, as of March 2026, the auto PLI scheme has disbursed only ₹2,321 crore, less than 10 per cent of its total allocation. Tata Motors, Mahindra & Mahindra, Bajaj Auto, TVS Motor Company, Ola Electric Technologies, and Toyota Kirloskar Auto Parts are currently the beneficiaries of the scheme.