The auto PLI India policy was introduced to boost domestic manufacturing of advanced automotive technologies, especially in the electric vehicle (EV) segment. However, recent disruptions in the global EV supply chain, particularly due to rare-earth material shortages, have prompted industry leaders to demand relaxations in PLI eligibility norms. These rare-earth elements are essential for EV batteries and motors, and most of them are imported from China, where new export restrictions have created uncertainty.
As Indian EV manufacturers scale up production to meet 2025 targets, the lack of timely access to raw materials has made it difficult for them to fully benefit from the auto PLI India scheme. Companies are now requesting flexibility in investment thresholds and localization timelines so they can continue developing cutting-edge technology despite supply chain issues.
Why Rare Earth Matters for the EV Supply Chain
Rare-earth materials like neodymium and dysprosium are vital for EV motors and lithium-ion batteries. India currently lacks adequate reserves and depends heavily on imports from China. Here’s why this poses a serious challenge:
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Over 90% of rare-earth magnets are imported from China
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New Chinese export rules in 2025 have tightened supply and raised costs
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Key components like battery packs and drive motors face production delays
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Local vendors are unable to meet current demand
This situation has directly impacted the EV supply chain in India and made it harder for companies to comply with auto PLI India timelines and manufacturing goals.
Industry Request for PLI Norm Relaxation
Leading EV makers and component suppliers have formally approached the Indian government seeking urgent policy support. Their primary demands include:
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Extension of localization deadlines under the PLI scheme
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Revision of minimum investment thresholds to accommodate delays
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Temporary relaxation of sourcing norms for rare-earth-based parts
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Faster clearance and import substitutions to counter supply gaps
These modifications would allow players in the EV supply chain to continue scaling up operations while mitigating global disruptions.
Government’s Current Response and Way Forward
The Ministry of Heavy Industries is reportedly reviewing these requests and may consider segment-wise relaxations, especially for EV startups and battery manufacturers. Officials are also evaluating ways to fast-track local mining and material processing projects. Additionally:
| Measure | Status |
|---|---|
| Policy review under progress | Ongoing |
| Industry consultations | Held in May 2025 |
| Potential phase-wise relaxation | Under consideration |
| Rare-earth partnerships | Talks with Australia & Vietnam |
Despite challenges, the core goal of the auto PLI India scheme — to make India a global hub for clean vehicle technology — remains unchanged.
Impact on the Indian EV Market
The rare-earth shortage and rigid PLI rules have temporarily slowed down parts of the EV supply chain, but there’s strong resilience in the industry. If relaxations are approved, experts believe production and innovation can quickly regain momentum. Key benefits of policy updates would include:
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Stability for component suppliers facing global sourcing issues
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Flexibility for new EV players to participate in the scheme
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Strengthened investor confidence in India’s clean mobility roadmap
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Faster development of alternatives to Chinese rare-earth dependence
This balance between policy support and self-reliance is expected to ensure that auto PLI India continues to drive transformation in the electric mobility sector.
FAQs
What is the PLI scheme for the auto sector in India?
The PLI (Production Linked Incentive) scheme supports companies that manufacture advanced automotive and EV components in India through financial incentives.
Why is the EV supply chain facing a rare-earth crisis?
Most rare-earth materials used in EV motors and batteries are imported from China, and recent export restrictions have limited their availability and raised costs.
Has the government agreed to relax PLI rules for the auto sector?
While formal approval is pending, the government is reviewing requests for relaxation in response to industry concerns and global supply disruptions.
What changes are EV companies asking for in the PLI scheme?
They are seeking extensions on localization deadlines, relaxation in investment norms, and flexibility in sourcing rare-earth components.
How will PLI relaxation help the Indian EV industry?
It will allow manufacturers to continue their expansion plans despite material shortages, keeping India’s EV transition on track.
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