Budget 2024: Auto Industry Lauds PLI Boost, Awaits Clarity On FAME III

The Indian automobile industry has expressed a mix of optimism and anticipation following the Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman. While the budget speech did not explicitly address the automobile sector, the budget estimates reveal significant allocations and incentives that are poised to benefit the industry.

One of the key highlights for the automobile sector is the substantial increase in the Production Linked Incentive (PLI) scheme for automobiles and auto components. The allocation has surged to ₹3,500 crore for FY25, a notable jump from ₹604 crore in FY24. This increase is expected to drive further investments and enhance local manufacturing capabilities.

Vinod Aggarwal, President of the Society of Indian Automobile Manufacturers (SIAM) and MD & CEO of VECV, commented, "The substantial increase in the PLI scheme allocation is a positive step towards boosting local manufacturing and attracting further investments. While the reduced allocation for FAME-III is a bit concerning, the duty exemptions on critical minerals are a welcome move that will support the EV sector."

Despite the absence of specific mentions in the budget speech, industry players were anticipating this monetary support for localisation. The economic survey of 2023-24 highlighted that the auto PLI scheme has already attracted an investment of ₹67,690 crore, with ₹14,043 crore invested by March 31, 2024. With 85 applicants approved under the auto PLI scheme, the total budgetary outlay of ₹25,938 crore from FY23 to FY27 is expected to significantly boost the sector.

The budget estimates also shed light on the allocation for the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicle) scheme. Although no formal announcement was made regarding FAME-III, the allocation for FY25 stands at ₹2,671.33 crore, compared to ₹5,171.97 crore in FY24. The FAME-II scheme, with an outlay of ₹11,500 crore, concluded on March 31, 2024.

Uday Narang, Founder and Chairman of Omega Seiki Pvt. Ltd., said, "The budget reflects a strategic approach to fostering growth and sustainability in the auto industry. The focus on reducing import duties on essential minerals for EV batteries is a significant step forward. Although more support for FAME-III would have been ideal, the overall direction towards localization and sustainability is encouraging."

While the reduced allocation for FAME may raise concerns, the government's broader push for electric mobility is evident. The National Programme on Advanced Chemistry Cell (ACC) Battery Storage has been allocated ₹250 crore for FY25, and the Electric Mobility Promotion Scheme 2024, introduced in April this year, has been allocated ₹500 crore.

A significant win for the electric vehicle sector is the exemption of import duties on critical minerals such as lithium, copper, and cobalt. These minerals are essential components for lithium-ion batteries, and their duty exemption is likely to reduce manufacturing costs and encourage the localisation of battery production in India. This move aligns with the government's goal of promoting sustainable transportation and reducing dependence on imports.