Ather, Euler Flag 13-16% Cost Disadvantage Over PLI Exclusion

Electric vehicle makers Ather Energy and Euler Motors have said that the exclusion of some startups, including them, from the government’s Production Linked Incentive (PLI) scheme for the automobile sector places them at a structural cost disadvantage of 13-16% compared with those included in the scheme. This potentially affects their ability to scale operations and compete in a fast-evolving market. 

Founders of the two Hero MotoCorp-backed companies said the current eligibility criteria of the scheme, which are largely based on scale and financial thresholds, risk overlooking investments made by newer electric-first manufacturers that have helped build the country’s EV ecosystem. They added that the cost gap comes at a time when startups are investing heavily in manufacturing capacity, research and development, and localisation.

The PLI scheme for the auto sector, announced in 2021, set eligibility criteria based on scale, allowing participation only for automakers with global group revenues exceeding Rs 10,000 crore. For new, non-automotive investors, eligibility was determined by a minimum global net worth of Rs 1,000 crore as of March 31, 2021, without a revenue threshold.

While Ola Electric, led by Bhavish Aggarwal, qualified under the latter category, established automakers such as Tata Motors, Mahindra & Mahindra, Bajaj Auto, Hyundai Motor India and TVS Motor Company were eligible under the revenue-based criteria.

The application window for the PLI-Auto scheme closed on March 31, 2021, when several electric vehicle startups were still in the early stages of scaling. The one-time application structure limited the entry of newer companies, resulting in firms such as Ather Energy being excluded from the scheme despite being among the earliest manufacturers of locally developed electric vehicles.

Tarun Mehta, co-founder and chief executive of Ather Energy, said many startups had invested early in technology and domestic manufacturing without the backing of large legacy operations.

“Many of these startups invested early in product, software, power electronics, and localisation, often without the cushion of legacy scale,” Mehta said, adding that these companies had helped create a competitive and dynamic electric vehicle market in India.

He said the current structure of the PLI scheme could create an imbalance by defining industry leaders primarily through legacy scale rather than innovation and capability.

“An EV policy architecture that defines champions primarily through legacy scale can create an unintended imbalance. It places emerging EV manufacturers at a 13 to 16 percent cost disadvantage at a stage where they are continuing to invest heavily in capability building,” Mehta said.

Euler Motors founder and CEO Saurav Kumar also echoed similar concerns, saying the cost gap could influence competition in segments where startups are driving adoption of electric mobility.

“What the current PLI scheme is doing for startups is forcing us to operate at a structural cost disadvantage of around 13-16 percent as compared to traditional OEMs in the same markets,” Kumar said. “This 13-16 percent could mean life or death for a startup.”

Both founders said they support the objectives of the incentive programme but believe the policy needs adjustments to reflect the evolving nature of the EV industry.

“What is needed is calibration of PLI, not overhaul,” Mehta said, adding that more flexible eligibility aligned with localisation and research intensity would help build long-term capability in the sector.

“Going forward, policy should reward intent in the form of performance, innovation, people, and investment, not just legacy/ age,” Kumar said.

Policy think tank the Centre for Digital Economy Policy has also said the current PLI eligibility design may favour larger incumbents over newer entrants in India’s fast-expanding electric two-wheeler market.

However, in a recent investor call, Ather’s management said the company sees the absence of PLI benefits as a long-term structural advantage, with CEO Tarun Mehta arguing that operating without policy-linked subsidies allows it to build a more robust pricing and profitability framework. He said operating outside the PLI framework has forced Ather to take pricing decisions proactively, rather than deferring them in anticipation of incentives, as some peers do.

Startups, including Ather, Euler and River, have been lobbying the government to be included in the incentive scheme, which is operational till FY29. Recently, there have been reports that the government is considering expanding the scheme to include electric vehicle startups and has sought inputs from the Society of Indian Automobile Manufacturers on possible changes.