Can I use Arduino instead of PCB?

I don't think an Arduino Uno or Mega would be suitable for a production line. They are really just for prototyping because the connections to them would probably work loose and cause problems. However you can get Arduino boards with solder connections that should be perfectly reliable.

On the other hand, the essence of an Arduino Uno is the Atmega 328 chip and it would be easy to design one of them into a PCB and that might be the most sensible thing as the PCB probably also needs to accommodate the various sensors that you mention without giving any details.

Having made a few projects with Atmega 328s fixed to strip board I strongly suspect that for the production of hundreds a custom PCB will be very much cheaper than all the manual work involved in the alternative.

Get alternative quotations from a few potential suppliers.

...R