Which auto stocks gain from Rs.26,058 crore PLI scheme?

The government on 15 September announced performance linked incentives (PLI) scheme for the automobile sector to the tune of Rs.26,058 crore. The PLI scheme will encourage the development and use of new technologies with a strong focus on green energy, which diverges away from traditional fossil fuels.

The timing of the scheme is quite appropriate. It comes when India has been trying to emerge as a veritable alternative to China in the manufacture of autos and auto components. With the new PLI scheme in place, India can not only build on its auto components strength, but can also emerge as a manufacture hub for global auto majors including EV plans of Toyota and Tesla.

The incentives of Rs.26,058 crore will be provided to auto companies over a period of 5 years and this scheme is expected to attract fresh investments in the auto sector worth Rs.42,500 crore. This scheme will trigger incremental production worth Rs.2.30 trillion plus create 7.50 lakh direct and indirect jobs.
The PLI scheme will be all inclusive. The incentives are quite high as manufacturers move towards electrical mobility and harnessing the power of hydrogen as a fuel in transport. The scheme will be available to four-wheelers for investments of Rs.2,000 crore, two-wheelers for investments more than Rs.1,000 crore and auto-component companies investing Rs.500 crore.

The big beneficiaries of this scheme will be the companies that are already aggressive on shift to EVs and related technologies. Here are some likely beneficiaries.

1. Tata Motors – for its focus on electrical vehicles as a major chunk in next 10 years.
2. Ashok Leyland – for its focus on green buses and green commercial vehicles
3. Amara Raja Batteries – for pioneering the shift in ecosystem to become a complete battery service provider to the EV space
4. Greaves Cotton – for its major focus on online marketplace for green vehicles.

The PLI scheme is likely to trigger big investments in auto and going to provide the much-needed boost to the automobile sector in India.

Also Read: Best Electrical Vehicles (EV) stocks to buy.