India Positions as Global EV Manufacturing Hub With $3.1B PLI & FAME Initiatives
India is currently the world’s third-largest automobile market and one of its fastest growing. According to India’s Ministry of Heavy Industries (MHI), the automotive sector’s current market size is Rs.12.5 lakh crore (USD 151 billion), expecting to double in size and scope, surpassing Rs.24.9 lakh crore (USD 300 billion) by 2030.
The automotive sector contributes over 7.1% to India’s GDP, MHI continues. Being such a massive world automotive market, India has the powerful opportunity to lead the global transition from conventional ICE-powertrain transportation to a more efficient and decarbonized electric vehicle (EV) technology approach. MHI predicts EVs will become a major category within the automobile sector, reporting India’s government has taken several initiatives to promote and support EV industry growth. These include the FAME India and PLI programs (more in a bit), projecting that by the year 2030, EV penetration in various transportation categories is likely to be as follows:
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35-40% for 2 wheelers
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9-11% for private 4 wheelers
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20-25% for shared 4 wheelers
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13-16% for buses
Production-linked incentives and FAME
In 2015, MHI rolled out the Faster Adoption of Electric Vehicles (FAME) initiative, followed by a FAME Phase II in 2019 with a Rs. 11,500 crore (USD 1.4 billion) bankroll to subsidize EV purchases and production.
Currently more than 22 states in India have dedicated EV policies for incentivizing EV purchases. These include direct subsidies, tax breaks, and infrastructure development. Given the size and potential of the Indian market, part of the rationale for FAME is to attract foreign investment and promote India as an EV manufacturing hub.
According to the plan, applicants promise to set up EV vehicle manufacturing plants in India with a minimum $500 million USD investment, also promising to be operational within three years from date of issuance and add a minimum 25% to their investment in the same period, rising to 50 percent in five years.
In September 2021, MHI together with the Indian government launched the Production-Linked Incentive (PLI) – Automotive program with an initial outlay of Rs.25,938 crore (USD 3.1 billion) investment in the automotive manufacturing value chain. The overall PLI scheme spans 10 key specific sectors, MHI notes, and will make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology, ensure efficiencies, create economies of scale, enhance exports, and make India an integral part of the global supply chain. Batteries, not surprisingly, not only have their own sector, they loom large in a number of others.
Big predictions, battery centric
India is expected to have a USD 1 trillion digital economy by 2026. Additionally, the government’s push for data localization, Internet of Things market in India, projects such as Smart City and Digital India are expected to increase the demand for electronic products. The PLI scheme will boost the production of electronic products in India.
Indeed, MHI says, the Prime Minister’s clarion call for an “Aatmanirbhar Bharat” (“Self-Reliant India”) envisages policies for the promotion of an efficient, equitable and resilient manufacturing sector in the country. Growth in production and exports of industrial goods will greatly expose the Indian industry to foreign competition and ideas, which will help in improving its capabilities to innovate further. Promotion of the manufacturing sector and creation of a conducive manufacturing ecosystem will not only enable integration with global supply chains but also establish backward linkages with India’s small and medium manufacturers, leading to overall growth in the economy and create huge employment opportunities, according to the plan.
India sees battery manufacturing representing one of the largest economic opportunities of the twenty-first century for several Indian global growth sectors, such as consumer electronics, electric vehicles, and renewable energy. The PLI scheme for ACC (advanced chemistry cells) will incentivize large domestic and international players in establishing a competitive ACC battery set-up in the country.
The world is paying attention
If funding and building a state-supported world-class global battery manufacturing industry brings another country to mind, that fact has not gone unnoticed. This October, India’s Financial Express reported China filing a complaint at the World Trade Organization (WTO) alleging India’s PLI schemes for advanced batteries, automobiles, and EV manufacturing violate global trade rules by favoring domestic goods.
According to a communication of the Geneva-based WTO, China has sought consultations with India on these measures under WTO’s dispute settlement mechanism.
In its complaint, China specifically mentioned three PLI programs – advanced chemistry cells (ACC), automobile and auto components, and promoting EV manufacturing as violating established global trade rules.
India’s trade deficit with China has widened to USD 99.2 billion during 2024-25. China’s complaint about India’s EV and battery subsidies comes as Beijing seeks to boost exports of its electric vehicles in the face of domestic overcapacity. Considering the size and scope of India’s auto market, Chinese EV automakers see it as a major source to expand sales.
Expect more to come.
