Auto Industry's Expectations From The Union Budget 2023-24

Pritesh Mahajan Jan 23, 2023

The automobile industry is going through a massive shift and it is absolutely astonishing to witness the progress the sector is making when it comes to green mobility. As environmental concerns rise, more and more people are sifting from traditional petrol-based vehicles to Electric Vehicles. The rapid growth of the EV market has thus unveiled big, positive data that further encourages the government to continue extending its incentives to this sector.

A lot has changed in the past year and the EV industry has grown by over 200 per cent in 2022. According to data from VAHAN, the number of electric vehicles in India raised from 3.2 lakhs in 2021 to a projected 10 lakh electric vehicles in 2022. This increase in the adoption of electric vehicles can also be seen in the trend, with a jump from 0.7 per cent in 2019 & 2020 to 1.7 per cent in 2021, and it's projected to reach 4.7 per cent of all vehicles sold in 2022.

When one looks at the state-wise growth, Delhi has the highest percentage of electric vehicle registrations among all states, at 10 per cent. Other states with high EV adoption include Karnataka at 6.1 per cent, Maharashtra at 5.6 per cent, and Tamil Nadu at 3.8 per cent.

Acknowledging the urgent need for EVs in the automobile sector, the government introduced many schemes and policies in the Union Budget 2022. These included several key initiatives, such as increased funding for capital expenditure, a high goal for national highway development, the creation of a policy for electric vehicle batteries, tax benefits for startups, support for small and medium-sized enterprises, a focus on rural economic growth, and efforts to increase the production of locally made parts.

However, as the automobile and transportation industry continue to undergo rapid changes, there is a need for a policy that smoothens this transition. For the upcoming Union Budget for 2023, to be announced by Finance Minister, Mrs. Nirmala Sitharaman, on February 1, 2023, the industry is expecting concrete plans on some crucial key areas including -

EV Charging Infrastructure Support

As we expect green mobility to take over the traditional Auto Industry, naturally the immediate need is a super-efficient charging infrastructure. Speaking about the growth in charging stations, Nitin Gadkari, Ministry of Road Transport and Highways (MoRTH), recently informed that Maharashtra has the maximum number of operational public EV charging stations (PCS) at 660, followed by Delhi (539) and Tamil Nadu (439). Currently, India has around 5,151 operational EV charging stations whereas EV sales stand at approx 10 lakhs.

While the charging station numbers are decent, they are still very low when compared to the growth observed in sales. Hence, the industry is anticipating incentives for a wider EV charging infrastructure penetration in the upcoming budget for 2023.

Incentives for in-house Battery Production

There are many limitations that the industry is facing currently as a majority of battery resources come from China. The Indian government and in fact even ISRO is encouraging vendors to develop batters under the Make in India Scheme. However, there is no sufficient infrastructure for battery manufactures to accelerate this process. Hence, it will be interesting to see how the government plans to ease this out for the auto industry.

Reduced Trade Duties and Tax Rates

Currently, the tax rates applicable to EVs are different compared to batteries. While Electric Vehicles have a GST rate of 5 per cent, lithium-ion batteries fall into the 18 per cent GST bracket. This makes it unfair for EV buyers to have to pay extra taxes on battery replacement. Additionally, as there are many more battery inventions undergoing, it is important to standardize tax rates across the EV industry in order for both customers and manufacturers to be able to make the best use of this revolution