CDEP Highlights Possible Eligibility Bias in India’s E2W PLI Scheme

India’s electric two-wheeler penetration has climbed from 0.14 percent in FY 2019–20 to 6.09 percent in FY 2024–25, reflecting what the Centre for Digital Economy Policy described as a “40x rise in E2W sales since FY 2019–20.” Presenting its analysis, CDEP said the Auto Production Linked Incentive scheme has contributed to this growth, but argued that the current eligibility design places greater emphasis on financial scale than on innovation metrics.

The Centre for Digital Economy Policy is an independent public policy think tank focused on digital economy, trade, technology and industrial policy. Dr Jaijit Bhattacharya, President, CDEP, said the objective of the study was to assess whether the Auto PLI scheme’s stated goals, boosting domestic manufacturing, strengthening competitiveness and driving exports, are being fully realised in the electric two-wheeler segment.

Data presented during the session showed not only rapid sales growth but also increasing concentration. According to CDEP, the four-firm concentration ratio in electric two-wheelers has increased from around 58 percent in FY20 to over 80 percent in FY25. PLI beneficiaries account for a substantial share of domestic sales, while a significant share of exports originates from firms that are not PLI beneficiaries.

Scale-Based Eligibility and Market Structure

CDEP’s report stated that the eligibility framework under Auto PLI is structured around revenue and fixed asset thresholds. “The crucial design flaw is the eligibility design places greater emphasis on historical financial scale,” Bhattacharya said. “The government signalling is that the bigger you are, the better it is.”

He acknowledged that the scheme has delivered measurable results in terms of volumes. “PLI has led to results,” he said, pointing to the sharp increase in electric two-wheeler sales since FY20. At the same time, he said the policy design warrants examination in a segment that is still evolving.

Referring to electric two-wheelers, he said, “It’s not a stabilised kind of a technology. It’s rapidly evolving.” He added that national champion approaches work “for stabilised technologies,” but emerging product categories may require calibrated criteria.

The report also noted that export performance is not evenly distributed across PLI and non-PLI firms, raising questions about how innovation and global competitiveness are being incentivised.

Startups, Legacy Players and Entry Windows

During the discussion, questions were raised on whether the scheme structurally favours established players over newer entrants. Bhattacharya said, “It’s always the startups which are coming out with new products,” while also acknowledging that legacy manufacturers benefit from scale, supply chains and distribution networks.

He pointed out that when PLI opened post-COVID, eligibility thresholds were significant. Revenue and fixed asset requirements, he said, were “humungous.” Companies that were smaller at the time could not qualify, and there is currently no fresh entry window.

When asked whether capital availability was the main issue, especially given that some legacy OEMs have invested in startups, Bhattacharya said the study did not examine “the colour of the capital.” Instead, it focused on entry criteria. “You can’t simply go from 0 to 100 kilometres per hour in a fraction of a second,” he said, referring to the scale required to meet eligibility benchmarks.

He cautioned that if the scheme is extended without review, it could alter competitive balance. “If PLI gets extended to the same players for another three, four, five years, they destroy the well-performing non-PLI players,” he said, recommending that the scheme be “open it up again.”

Lessons from FAME and Policy Sequencing

Questions were also raised on whether allocation patterns under PLI were influenced by compliance challenges seen under FAME. Bhattacharya described earlier issues as “done and dusted” and added, “Human enterprise will find out ways and means to leverage every policy.”

On why FAME was not analysed alongside PLI, he reiterated that the current report focused on active policy levers. “If you look at all aspects of policy, then we would not be able to figure out what is impacting what, what is cause and what is effect,” he said. “We are looking at live policy changes.”

The discussion also touched on whether EV policy is being evaluated through the same lens as earlier phased-manufacturing models used in autos and mobile manufacturing. Bhattacharya traced such policy approaches to localisation incentives in the 1980s and 1990s, which he said helped India become “a dominant player” in certain segments.

However, he noted that electric two-wheelers represent “a product line which did not exist 10 years ago” in their present form, suggesting that policy calibration may need to reflect the specific characteristics of the segment.

First-Come Mechanism and Supply Chains

Responding to queries about adopting a “first-come-first-serve” mechanism, Bhattacharya clarified that it does not resemble telecom-era licensing. “It’s not a license being given,” he said. He explained that the proposal refers to post-production verification rather than upfront allocation. “If you have produced it… then go submit that proof and take the money and walk out. That’s the first-come-first-serve , not upfront, but subsequently.”

On product mix, he noted that electric motorcycles remain limited despite motorcycles accounting for a majority of India’s two-wheeler market. Developing electric motorcycles involves “very complex R&D, thermal management, high density batteries,” he said.

The session also touched on rare earth supply chains and critical minerals. Differentiating between rare earths and critical minerals, Bhattacharya said scaling extraction, purification and magnet manufacturing will take time. “It’s 5 to 7 years,” he said, noting that the timeline includes exploration, technology stabilisation and industrial scaling.

Questions on circularity, battery recycling, gender mainstreaming within PLI and the ACC battery scheme were also raised. Bhattacharya said these aspects were not examined in the present report. “We have not looked into that,” he said regarding circularity.