Roadmap for an Automotive Component Technology Upgradation Financing Facility

The Climate Policy Initiative (CPI) proposes the Automotive Component Technology Upgradation Financing Facility (AC-TUFF) to support Indian micro-, small-, and medium-sized enterprises (MSMEs) in transitioning from internal combustion engine vehicles to electric vehicle (EV) value chains. The report identifies a significant investment gap and proposes a tiered capital stack combined with technical assistance to enable MSMEs to upgrade technology and processes.

• Indian MSMEs in the automotive component industry face significant financial barriers to EV transition, including expensive capital, limited risk appetite, and a misalignment between available funding and their specific needs. Private equity and venture capital typically favor large-scale players and OEMs, while traditional bank lending relies on backward-looking metrics and collateral that penalize firms during technology retooling.
• The market opportunity for EV components in India is substantial, with annual demand for battery packs, motors, power electronics, and connectivity/control systems potentially reaching INR 3.86 lakh crore (USD 46.17 billion) by FY2035. To maintain their current turnover shares during the pivot to EVs, Indian MSMEs are estimated to require a cumulative investment of INR 55,000 crore (USD 6.6 billion) between FY2026 and FY2035.
• The proposed Automotive Component Technology Upgradation Financing Facility (AC-TUFF) is designed as a revolving, market-building facility that combines a tiered capital stack—consisting of senior commercial, concessional, and first-loss capital—with integrated technical assistance (TA). It aims to operate through partner financial institutions using on-lending and credit guarantees, utilizing a dual-credit enhancement system and a phased rollout in tranches of 6, 18, and 60 months.
• To deepen technology diffusion and accelerate competitiveness, the roadmap recommends implementing tiered production-linked incentive (PLI) access for MSMEs, establishing cluster-based common facilities, and creating structured partnerships with anchor OEMs and PLI champions.

APA

Climate Policy Initiative (2025). Roadmap for an Automotive Component Technology Upgradation Financing Facility. https://www.climatepolicyinitiative.org/publication/roadmap-for-an-automotive-component-technology-upgradation-financing-facility/

Chicago

Climate Policy Initiative. Roadmap for an Automotive Component Technology Upgradation Financing Facility. 2025. https://www.climatepolicyinitiative.org/publication/roadmap-for-an-automotive-component-technology-upgradation-financing-facility/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Roadmap for an Automotive Component Technology Upgradation Financing Facility |date=23 September 2025 |url=https://www.climatepolicyinitiative.org/publication/roadmap-for-an-automotive-component-technology-upgradation-financing-facility/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2025roadmap, author = {{Climate Policy Initiative}}, title = {{Roadmap for an Automotive Component Technology Upgradation Financing Facility}}, institution = {Climate Policy Initiative}, year = {2025}, month = sep, url = {https://www.climatepolicyinitiative.org/publication/roadmap-for-an-automotive-component-technology-upgradation-financing-facility/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }