Centre May Clear PLI Applications From Auto Firms With Chinese Investment: Report

The Centre is likely to consider Production-Linked Incentive (PLI) applications from automobile and auto component firms that have Chinese investment, thus, opening the door for more Chinese-linked businesses to access incentives for domestic manufacturing, says a report by The Economic Times.

The move would enable PLI benefits for two Tata AutoComp Systems ventures with Chinese partners as well as JSW MG Motor India, according to a senior government official.

"Existing PLI applications that now have FDI approvals will be considered. A window for fresh applications under PLI is not being opened," an official was quoted as saying in the report.

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The development comes against the backdrop of improving India-China relations, after Chinese President Xi Jinping’s visit to India earlier this month for the BRICS Summit and his bilateral meeting with Prime Minister Narendra Modi.

The likely clearance is significant because approvals for Chinese foreign direct investment had become a bottleneck for companies seeking benefits under the automotive PLI scheme. 

JSW MG Motor India, which manufactures and sells MG-branded passenger vehicles in the country, is a joint venture between JSW Group and China’s SAIC Motor.

Tata AutoComp Systems has two ventures involving Chinese partners that could also be affected by the move. TACO Prestolite, its joint venture with Prestolite Electric Beijing, develops and manufactures electric drivetrains and traction motors for electric vehicles. TACO Air International, formed with Air International Shanghai Co, manufactures automotive air-conditioning systems.

Some companies have already begun seeing movement on their PLI applications. 

Dixon Technologies’ venture with a Chinese partner for electronic components is among those that has received approval for PLI benefits, the official noted.

The latest policy shift follows several months of increased engagement between New Delhi and Beijing. Relations had deteriorated sharply after the Galwan Valley border clashes in June 2020.

India subsequently introduced tighter scrutiny of foreign investment from countries sharing a land border with the country, making prior government approval mandatory across sectors. More than 200 Chinese mobile applications were also banned during that period.

Since then, ministerial and official-level engagement has increased. India and China have also agreed to resume direct flights, indicating a gradual easing of restrictions between the two countries.

For the automotive industry, the changing investment environment could have implications for companies that rely on Chinese technology, components, joint ventures and supply-chain relationships, particularly in electric mobility.

The automotive PLI scheme was approved in September 2021 with a budgetary allocation of Rs 25,938 crore. The programme was designed to reward eligible companies for meeting specified targets related to incremental production, investment and domestic value addition, among other parameters, with incentives beginning from 2023-24.

Investment commitments under the scheme have since crossed ₹45,000 crore, while the government is expected to disburse around ₹4,000 crore under the programme during the current financial year.

The incentives are linked to eligible companies achieving incremental sales in FY26. The government's allocation for the scheme has also increased sharply, with the FY27 Budget providing ₹5,939.87 crore, compared with ₹2,091.26 crore in the previous financial year.