The government is examining Kia India Pvt Ltd’s electric vehicle investments in 2024 to decide if the South Korean carmaker’s local unit is eligible for receiving production-linked incentives (PLI), Mint has learnt.
“The company had previously not updated their investments onto the PLI-Auto portal and not met deadlines, and they have reached out to the heavy industries ministry with the relevant disclosures about their investments in EV projects,” said a senior government official, speaking on the condition of anonymity.
“But no decision has been taken about whether the company will be eligible for incentives,” the official said.
Companies are required to update information about investments and sales on the PLI portal every quarter. But the ministry received communication from Kia India only in early January, the official said.
Mint reported on 23 December the government could exclude a dozen companies, including Kia India, from the scheme due to lack of investment proof. The caution reflects increased glare over foreign carmakers after both Kia and Volkswagen Group’s India unit faced tax demands for allegedly importing cars as individual parts, instead of categorizing the shipments as ‘completely knocked down’ or CKD kits that attract a higher tax rate.
Companies need to provide proof of investment to avail subsidies under the Centre’s ₹25,938-crore PLI-Auto scheme that incentivizes the manufacturing of zero-emission vehicles in the country. As of 11 March, only three out of the 82 approved companies have received these incentives.
Kia India informed the ministry of heavy industries that it had made investments towards EV projects but could not update the information on the PLI-Auto portal within the deadline, according to a communication reviewed by Mint.
The company said it was unable to upload the necessary details on the portal due to “recent changes in the authorization process”, according to the communication.
Queries emailed to the ministry on 5 March did not elicit a response.
Kia India also didn’t respond to a query emailed on 5 March or to reminders via email, WhatsApp text messages, and over the phone.
How incentives work
Vehicle and auto component makers must invest in cleaner vehicles using advanced automotive technology to claim PLI. If satisfied, the government will provide incentives worth 13-18% of the “determined sales value” or incremental or excess sales in a particular financial year over FY20, the base year.
For instance, if a company sold electric vehicles worth ₹100 in FY20 and worth ₹200 in FY25, then the government would provide an incentive of 13-18% on ₹100 — the difference between the sales in the two years. The incentive for component makers is 8-13%.
Kia’s vehicles have not been approved under the scheme. The list on the PLI-Auto website had no entries from the maker of EV6 and EV9 models as on 11 March.
If a company does not furnish proof of domestic investments for two consecutive years, the government can remove it from the scheme and invoke the bank guarantee provided at the time of selection. The company can then no longer participate in the PLI scheme.
So far, Tata Motors Ltd and Mahindra & Mahindra Ltd have been approved to receive ₹246 crore cumulatively for their FY24 sales. Electric scooter maker Ola Electric Ltd also received ₹73.74 crore in incentives for its FY24 sales, the company informed exchanges.
Automakers face scrutiny
The scrutiny of EV incentives also marks caution after the government alleged that some electric two-wheeler makers unduly availed subsidies. It tasked the corporate affairs ministry’s Serious Fraud Investigation Office (SFIO) to investigate Hero Electric Vehicles Pvt Ltd, Benling India Energy and Technology Pvt Ltd, and Okinawa Autotech Internationall Pvt Ltd in December 2024, accusing them of fraudulently availing of subsidies worth ₹297 crore under the second leg of its Faster Adoption and Manufacturing of Electric (and Hybrid) or FAME-II scheme. The companies denied wrongdoing.
FAME-II, which from FY19 to FY24 subsidised electric vehicles for consumers, allowed automakers to be reimbursed the subsidized amount.
Separately, the Union government has also demanded $1.4 billion in tax from German automaker Volkswagen Group, alleging that it mislabelled imports over the past 12 years as individual parts, paying 5-15% duty instead of 35% on the completely knocked down kits. The company has challenged the demand in the Bombay High Court.
Kia India also faced an investigation by tax authorities for similar discrepancies worth about $155 million, Reuters reported on 5 February. Kia reportedly complied after a warning from tax officials, according to another Reuters report on 26 February, and the company started classifying imports accurately.
Kia’s group and South Korean peer Hyundai Motors faced allegations from the Maharashtra and Tamil Nadu governments of evading goods and services tax (GST) worth over ₹17 crore, Mint reported on 1 March. The automaker said that there will be no impact of the GST orders on their financial, operational or other activities.
Slowing growth, low incentives
India is looking to boost manufacturing to drive growth and create jobs, a goal that Union finance minister Nirmala Sitharaman reiterated in her budget for FY26 on 1 February.
The automobile sector contributes 35% to the country’s manufacturing output, according to the ministry of heavy industries. The government seeks to further incentivize local auto production.
Yet, the industry faces increased scrutiny, and that too when growth is slowing. Icra Ltd estimates the two-wheeler industry volumes to grow at 6-9% in FY26, following an estimated 11-14% in FY25. The rating agency pegs the passenger vehicle segment growth at 4-7% in FY26, after a lull of 0-2% growth in FY25.
It sees the auto components sector growing at 8-10% in FY26, marginally better than FY25’s 7-9% but lower than the highs of 14% in FY24.
Moreover, the PLI conditions are stringent, and disbursals will be too small for any meaningful benefit for automakers.
Vehicle makers seeking to avail the subsidies need to have a minimum revenue of ₹10,000 crore, while component makers must have a turnover of at least ₹500 crore, according to the scheme notification. They must show an investment in fixed assets worth ₹3,000 crore and ₹150 crore, respectively.
Non-auto companies seeking to avail PLI-Auto benefits must have had a global net worth of ₹1,000 crore in FY21, making the entry of smaller firms difficult.
“The PLI scheme has been successful in terms of commitments,” said Vinkesh Gulati, former president of the Federation of Automobile Dealers Associations of India. “However, it needs to be seen how the actual investments are implemented and incentives disbursed.”
The ministry of heavy industries has said disbursal under the PLI-Auto scheme would begin in FY25. But in the Outcome Budget for FY26, the government said only 12% of the total allocation of the PLI-Auto scheme for FY26 will be disbursed as incentives. Which means, of the ₹2,818.85 crore allocated, the government will hand out only ₹336.77 crore to companies.
