India Reshapes Make-in-India: ₹22,900 Crore Component Push Complements Tesla’s Quiet Model Y Entry
India phases out its PLI and launches a ₹22,900 crore Component Manufacturing Scheme to deepen electronics value chains, while Tesla launches Model Y in India at ₹61 lakh.
NewsSutra
India's industrial policy witnessed a pivotal moment this week as the Modi government unveiled a twofold strategic move: phasing out its flagship Production-Linked Incentive (PLI) scheme by mid-2026 and replacing it with a focused ₹22,900 crore Component Manufacturing Scheme (CMS). Meanwhile, Tesla has made a notable but subtle entry into the Indian market with the launch of its Model Y SUV, priced around ₹61 lakh. These developments jointly signal India’s pivot from product assembly to value-rich manufacturing, and its gradual embrace of green technologies in the luxury segment.
1. From Assembly to Deep Tech: The New Component Strategy
Since 2020, PLI has incentivized production of finished goods—smartphones, electronics, appliances—under Make-in-India. But officials noted that while PLI generated nearly $200 billion in output and over 1.2 million jobs, it mostly attracted global brands to assemble final goods (turn0search0). With India still importing critical electronics components like PCBs, camera modules, Li-ion cells, and passives, a deeper structural gap persisted.
In April 2025, the Centre approved the Component Manufacturing Scheme, allocating ₹22,900 crore over six years to incentivize domestic production of key sub-assemblies and capital equipment (turn0search10). The objective is clear: move beyond assembly to become part of the global value chain—design, innovation, and component-level production essential to electronics sovereignty.
2. Encouraging Momentum: Industry Response
Government sources told the Economic Times that approvals for the new CMS are expected as early as August–September, with nearly 100 proposals worth ₹8,000 crore already submitted by companies like Dixon, Tata, Zetwerk, Foxconn among others (turn0search16, turn0search4). KPMG analysis suggests participants can expect incentives on both turnover and capital expenditure if they meet quality and local content benchmarks in areas like PCBs, Li-ion cells, and camera modules.
The transition highlights a strategic vision: encourage both foreign-invested joint ventures and domestic firms to build deep supply chains. The endgame? Reduce India's dependence on imports—currently over 50%—and anchor R&D, design, and high-end manufacturing domestically.
3. Policy Mechanics: CMS vs. PLI
Unlike PLI, which rewarded sales of final products, CMS focuses on sub-assemblies and components:
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Turnover-linked incentives: A percentage of incremental sales beyond a baseline.
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Capex-linked incentives: Reimbursement of a portion of fixed investments.
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Localisation thresholds: Designed to drive supply chain depth—raw materials, chemicals, or process equipment.
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Quality standards: Manufacturers must adhere to Six Sigma or global benchmarks, ensuring a shift from volume to quality.
Additionally, CMS supports capital goods and sub-assemblies—vacuum pumps, wafer fab equipment, segmentation of value captured in the bill of materials.
Overall, CMS is about strategic scale-up, while PLI ignited assembly activity.
4. Tesla’s Arrival: Model Y Makes Quiet Debut
In parallel with industrial policy changes, Tesla has officially launched its Model Y in India. The Rear-Wheel Drive variant starts at ₹59.89 lakh ex-showroom, while the Long-Range version goes up to ₹67.89 lakh. On-road prices settle near ₹61 lakh for Mumbai and similar major metros (turn0news22, turn0news26, turn0news18). Tesla inaugurated its first Indian showroom in Mumbai’s Bandra-Kurla Complex and opened online bookings with a ₹2 lakh refundable deposit (turn0news21, turn0news19, turn0search5).
Despite public anticipation since India relaxed most regulatory hurdles, Tesla chose a low-key strategy—no flashy events. The Model Y will be imported for now, targeting the luxury EV buyer and competing against BMW and Mercedes rather than local EV brands.
5. Policy and Market Synergy
While not directly related, the CMS and Tesla’s entry exemplify India's broader industrial trajectory:
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Policy incentives: CMS encourages parts manufacturing, from camera modules inside smartphones to EV-specific electronics. Such components may eventually feed into EV production lines, reducing costs.
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Future-proofing: With shifts toward electric and automated vehicles, local suppliers producing modules and battery packs stand to benefit.
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Tax signals: Tesla’s high landed price—driven by import duties (70%) and luxury taxes (30%)—underscores why local assembly and component production are critical to reduce costs (turn0news22).
The phased approach allows domestic capability to mature before potentially hosting final assembly plants.
6. Challenges Ahead
Despite momentum, several obstacles remain:
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Manufacturing readiness: Electronics components demand precision, low contamination, and advanced processes—significant investment in facilities, testing labs, and talent is essential.
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Supply chain gaps: India still lacks domestic industries for chemicals, specialty materials, and fabrication tools used in semiconductors and electronics.
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Execution risk: The success of CMS will depend on timely approvals, transparent allocation of funds, and efficient disbursement mechanisms.
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EV ecosystem: Tesla may hesitate to invest locally until duty structures become more favorable and component availability improves.
7. Geopolitical Context: Supply Chain Rebalancing
India's push aligns with global semiconductor realignments. Governments in the U.S., Europe, Japan, and South Korea are incentivizing electronics and chip production away from China. India’s CMS replicates parts of that model, moving the country beyond the assembly line and into strategic manufacturing.
Global firms like Foxconn and Logitech have already signaled interest in India-based component hubs—an essential first step before final assembly, signaling confidence in domestic supply chain capabilities.
8. Economic Implications
Analysts expect CMS to bring significant economic benefits:
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Import substitution: Current electronics imports are estimated at ₹9.5 trillion in FY24, with components accounting for a large share (turn0search16). CMS could halve that in five years.
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Job creation: Each manufacturing facility across India could employ hundreds directly and support thousands more in supply chain clusters.
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R&D push: Higher-value components—camera modules, battery systems—require domestic innovation, fueling STEM research and patenting.
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Export potential: As global companies diversify production, India may emerge as a hub for exporting electronic components, not just final devices.
9. Industry Perspectives
Senior industry voices welcome the shift:
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Atul Lall, MD of Dixon Technologies: CMS is a strategic opportunity to deepen value-add in components, building from display and battery systems up (turn0search4).
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Josh Foulger, Zetwerk Electronics: The scheme enables ecosystem building with supplier support across fabrication, packaging, and tooling (turn0search4).
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KPMG analysts: CMS aligns with global industrial trends—scale, quality, integration of component ecosystems (turn0search10).
Conclusion: A Milestone Industrial Pivot
India’s move to sunset its broad PLI framework and launch a focused ₹22,900 crore Component Manufacturing Scheme is a strategic leap toward value-based manufacturing. By targeting core sub-assemblies and equipment, policymakers are seeking deeper, higher-quality industrial growth.
Simultaneously, Tesla’s Model Y arrival—though quiet—signals India’s readiness to participate in the future of mobility, especially as EV capabilities evolve domestically. Over time, the combination of policy and market signals could transform India from the world’s factory floor into its innovation bedrock.
For India’s industrial planners, the next 18 months are crucial: CMS project approvals, Tesla’s performance, and ecosystem development will test whether rhetoric matches readiness. If executed well, India can move from assembling devices to designing, innovating, and exporting them—closing the “missing link” in its manufacturing journey.
