The Indian electric vehicle (EV) startup ecosystem is currently locked in a critical policy battle with the central government. Led by the CII Unicorn Forum, major players including Ather Energy, River Mobility, Euler Motors, and Ultraviolette have formally petitioned the Prime Minister’s Office (PMO) to address what they call “structural flaws” in the Auto Production-Linked Incentive (PLI) scheme.
The core of the conflict lies in the eligibility thresholds, which startups argue are designed for “legacy boardrooms” rather than “innovation hubs.”
The “Cost Disadvantage” Problem
EV startups claim that the current PLI structure creates a 13% to 16% cost disadvantage for new-age companies compared to legacy manufacturers.
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The Scale Bias: To qualify for the ₹25,938 crore scheme, an OEM must have a global group revenue of at least ₹10,000 crore and fixed assets worth ₹3,000 crore.
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The Impact: Established giants like Tata Motors, Mahindra, and Bajaj Auto easily meet these criteria, allowing them to claim massive subsidies. Startups, which focus on R&D and indigenous platform building rather than historical scale, are left to compete without this financial buffer.
Parliamentary Backing for Startups
In a significant development, a Parliamentary Standing Committee report (332nd Report, March 2026) has echoed these concerns.
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Limiting Participation: The committee noted that “high revenue and investment thresholds” are actively blocking emerging domestic manufacturers
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Sales vs. Investment: While the scheme has successfully attracted roughly ₹39,081 crore in investment commitments, the committee flagged that sales performance and job creation are lagging significantly behind targets.
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Recommendation: The panel has urged the Ministry of Heavy Industries (MHI) to review eligibility rules and consider a “multi-window” framework where slots from underperforming legacy companies could be reallocated to agile startups.
Current Status of EV Incentives (as of May 2026)
| Scheme | Focus | Status/Update |
| Auto PLI | Manufacturing Scale | Favoring legacy OEMs; Startups currently excluded. |
| PM E-DRIVE | Consumer Demand | ₹10,900 Cr outlay; Over 16.5 lakh EVs incentivized by Jan 2026. |
| PLI ACC | Battery Storage | More flexible “multi-window” model that startups want the Auto PLI to mimic. |
| GST Benefits | Affordability | GST remains at 5% for EVs and chargers (vs. 12-18% for ICE). |
The Government’s “Champion” Stance
Despite the pressure, senior government officials have recently maintained that PLI schemes are intended to create “Global Champions” with massive capital and marketing muscle, rather than act as a support system for early-stage companies. They suggest that startups should instead rely on demand-side subsidies like PM E-DRIVE (which replaced FAME-II)
The “Dynamic Reallocation” Proposal
Startups like Ather Energy have proposed a compromise: a system where incentives are not locked in for five years. If a “Champion OEM” fails to meet its sales or investment milestones, its allotted subsidy “slot” should be opened for fresh bidding, allowing high-performing startups to step in.
