Auto PLI Scheme Reform: Will Ather and River Gain Entry?

Introduction

A recent report by a Parliamentary panel has brought significant shortcomings in the government's Production-Linked Incentive (PLI) scheme for automobiles and auto components into sharp focus. The committee has recommended relaxing the stringent eligibility criteria, a move that could finally open the door for high-potential electric vehicle (EV) startups like Ather Energy and River. This development, reportedly backed by the Prime Minister’s Office (PMO), signals a potential overhaul of the ₹25,938 crore scheme to better align it with the goal of fostering a robust domestic EV ecosystem.

Scheme's Performance Under Scrutiny

The Standing Committee on Industry, in its 332nd report, highlighted a major disconnect between the scheme's investments and its actual outcomes. While cumulative investment has reached ₹39,081 crore, nearing the five-year target of ₹42,500 crore, key performance indicators are lagging. Job creation stands at just 61,241, significantly below the target of over 1.48 lakh. Furthermore, only ₹2,378 crore in incentives had been disbursed as of January 31, a small fraction of the allocated funds. The report noted that sales performance has also failed to meet expectations, pointing to systemic issues in the scheme's implementation.

The Startup Hurdle: Stringent Eligibility Norms

The primary barrier for new-age EV companies has been the scheme's rigid entry requirements. To qualify, original equipment manufacturers (OEMs) must have a group global turnover of at least ₹10,000 crore and have invested ₹3,000 crore in fixed assets. Component makers need a turnover of ₹500 crore. These criteria automatically favor established legacy automakers with large petrol vehicle balance sheets, such as Tata Motors, Mahindra & Mahindra, and Maruti Suzuki, while excluding pure-play EV startups that are still in their growth phase. This has created an uneven playing field, where the very companies driving innovation in the EV space are unable to access government support.

A Push for 'Calibrated Flexibility'

Addressing this gap, the Parliamentary panel has suggested introducing “calibrated flexibility or differentiated eligibility criteria” for promising domestic players and startups, particularly in the electric two-wheeler (e-2W) segment. This recommendation aligns with long-standing demands from the startup community. Companies like Ather Energy and River have been advocating for a dedicated, innovation-linked sub-window within the PLI scheme to level the playing field. The panel's backing adds significant weight to their argument, suggesting that policy may soon catch up with market realities.

Industry Voices and PMO Intervention

The call for reform has been amplified by industry leaders. Tarun Mehta, Co-founder and CEO of Ather Energy, speaking at the BS Manthan 2026 summit, argued that the PLI scheme, in its current form, inadvertently “penalizes” pure EV players. He emphasized that including startups is crucial for India to capture a potential $100 billion global electric two-wheeler export market. Adding momentum to this push is a reported “nudge” from the PMO, which has asked the Ministry of Heavy Industries to consider reopening the PLI window for EV startups. This high-level intervention suggests that changes to the scheme are being actively considered.

Potential Beneficiaries and Next Steps

If the Union Cabinet approves the proposed changes, several innovative companies stand to benefit. Frontrunners include leading e-scooter manufacturer Ather Energy, commercial EV player Euler Motors, and newer entrant River Mobility. The Society of Indian Automobile Manufacturers (SIAM) is expected to discuss the matter in its electric mobility group meeting. However, any formal alteration to the scheme's core eligibility criteria will require final approval from the Union Cabinet, which will be a critical step to watch.

Market Impact and Analysis

Reforming the PLI scheme to include startups could be a vital catalyst for India's EV sector. At a time when EV sales momentum has shown signs of softening, such a move would inject fresh energy into the market. It would help lower production costs for startups, accelerate the localization of critical components, and enhance their competitiveness against established players who receive incentives of 13-18% on determined sales value. By supporting domestic innovation, the government can strengthen the entire EV value chain and position India as a formidable player in the global EV market, which is projected to reach $110 billion by 2029.

Conclusion

The convergence of the Parliamentary panel's recommendations, strong industry advocacy, and intervention from the PMO has created a powerful momentum for reforming the Auto PLI scheme. The focus is now on creating a more inclusive framework that supports the innovative startups driving India's electric mobility transition. The upcoming discussions at SIAM and the subsequent decision by the Union Cabinet will be pivotal in determining whether the scheme can truly fulfill its promise of making India a global automotive manufacturing hub.