A new report says the Production Linked Incentive (PLI) scheme for two-wheelers has distorted the auto market by driving growth while sidelining innovation-led manufacturers, even as the Centre argues that many such startups lack the capital and market access to scale.

Non-PLI entities’ sales growth rate declined from 407% in FY22 to -33% in FY24 and -11% in FY25. This shift coincided with a reordering of market leadership, at the expense of the industry’s innovation engine, says the Centre for Digital Economy Policy Research in its report titled “Impact assessment of auto PLI on two-wheeler EV industry”. 

On innovation, the report highlights that much of the patent activity and new product development has come from companies outside the PLI framework. Many PLI beneficiaries have avoided hard-to electrify segments like electric motorcycles. In contrast, non-PLI firms are leading development in high-performance and electric motorcycle platforms, but face funding constraints and lack of production-linked support, limiting their ability to scale, states the report.