India’s production-linked incentive scheme for automobiles has sharply altered the competitive landscape of the electric two-wheeler market, with non-beneficiary manufacturers seeing growth collapse from 407 per cent to minus 33 per cent within two years of the programme’s rollout, according to a study released by the Centre for Digital Economy Policy Research (C-DEP).
The New Delhi-based policy think tank said its analysis of the Auto Production Linked Incentive (PLI) Scheme found that while the programme accelerated scale among approved applicants, it also created a 13–16 per cent cost advantage that enabled beneficiaries to aggressively capture domestic market share at the expense of non-PLI manufacturers.
Non-PLI electric two-wheeler makers recorded 407 per cent growth in FY2022 before the scheme’s effects took hold, but growth fell to minus 33 per cent in FY2024 and further to minus 11 per cent in FY2025 after the rollout, the report showed. “The cost differential has significantly reshaped competitive dynamics,” C-DEP said in its study, adding that the scheme’s current design risked marginalising innovation-led companies that had played a formative role in building India’s early electric mobility ecosystem.
The electric two-wheeler segment has emerged as a leading pillar of India’s clean mobility transition. Over the past six years, electric two-wheeler sales have risen from a negligible base in FY2019 to nearly 6 per cent of total two-wheeler sales, supported by incentives under the PM E-DRIVE and FAME schemes as well as progressive policy frameworks.
Introduced in 2021, the Auto PLI scheme was intended to accelerate domestic manufacturing, address cost disadvantages, encourage localisation and foster innovation. C-DEP evaluated its impact across five parameters: sales performance, export competitiveness, innovation outcomes including patent filings and product development, localisation, and domestic value addition.
While PLI-approved original equipment manufacturers (OEMs) have benefited from production scale and pricing power, the study found that export competitiveness has not kept pace.
Domestic Market Capture And Export Performance
Despite enjoying a 13–16 per cent cost advantage, PLI-approved models account for less than one-fourth of India’s electric two-wheeler exports. By contrast, 77 per cent of exports are driven by non-PLI models, highlighting what the report describes as a stark divergence between domestic market capture and export performance.
C-DEP warned that PLI beneficiaries were using the cost advantage primarily to consolidate domestic share rather than to build export-ready technology platforms. As non-PLI manufacturers face shrinking domestic space, India risks ceding traditional two-wheeler export markets such as Nepal and parts of Latin America and Africa to Chinese electric vehicle manufacturers, including Yadea and Sunra as global demand shifts toward electric mobility, the study said.
Innovation activity, the report noted, remains concentrated largely outside the PLI framework, particularly in technically demanding segments such as electric motorcycles and low-speed delivery scooters.
Motorcycles account for nearly 65 per cent of India’s overall two-wheeler market, yet electric penetration in this segment stands at approximately 0.1 per cent. According to C-DEP, several large PLI beneficiaries have avoided these difficult-to-electrify, lower-margin categories, leaving research and development-intensive work to non-incentivised start-ups.
Without production-linked support, these innovation-led firms face higher capital requirements, limited access to risk capital and structural disadvantages in scaling up operations, potentially weakening India’s long-term technological depth in advanced clean mobility, the report said. The study also flagged what it termed “inactive PLI players”, approved applicants that retain access to scheme benefits without delivering meaningful production outcomes.
Out of nine approved electric two-wheeler OEMs under the Auto PLI scheme, only four are actively producing and selling vehicles, according to C-DEP. Companies including Hop Electric, Axis Clean Mobility, Booma Innovative Transport Solutions and Elest Private Limited have failed to produce any Auto PLI-approved models. In FY2024–25, Hop Electric recorded 289 sales and Booma 935 sales, while Axis Clean Mobility and Elest recorded zero sales, the report said.
Non-performing Players Locking Up Fiscal Space
The study noted that these non-performing players are effectively locking up fiscal space within the scheme’s total outlay of Rs 25,938 crore, which has already seen limited deployment. By December 2025, only Rs 2,321.94 crore had been disbursed against a cumulative target of Rs 3,754 crore, representing 9 per cent of the total outlay against an expected 14.47 per cent, C-DEP said.
The gap between approvals and actual production performance restricts entry for innovation-led OEMs that could otherwise productively deploy capital, the report added. C-DEP further noted that the interaction between the Auto PLI scheme and PM E-DRIVE incentives has concentrated advantages among a limited group of manufacturers, accelerating consolidation at an early stage of industry development.
The think tank recommended opening a targeted window for innovation-led OEMs that demonstrate strong localisation depth in line with PM E-DRIVE’s Phased Manufacturing Programme. It also called for adopting a first-come, first-served mechanism to prevent inactive players from hoarding approvals and fiscal space.
Additional recommendations included introducing segment-specific innovation incentives of 3–5 per cent to encourage development of complex electric motorcycles and other hard-to-electrify segments, as well as instituting periodic performance reviews to exit non-performing beneficiaries and reallocate fiscal space more efficiently.
Jaijit Bhattacharya, President of C-DEP, said India’s electric two-wheeler industry was at a crucial juncture. He added, "Our analysis indicates that the current design of the Auto PLI scheme, while beneficial for scaling production, inadvertently disadvantages innovation-driven companies that are investing heavily in R&D and new technologies. A policy framework that focuses solely on scale risks undermines the long-term competitiveness of the sector and the potential for India to lead globally in advanced clean mobility technologies.” |
