Saturday | Mar 08 2025 | 08:44:57 PM
The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, reinforces India’s commitment to strengthening its automotive industry with key policy interventions and incentives. As one of the largest contributors to India’s GDP and employment, the automotive sector plays a critical role in driving economic growth. With a focus on electric vehicles (EVs), clean energy, and manufacturing localisation, the government aims to make India a global leader in sustainable mobility and advanced automotive technologies.
Strengthening Domestic Manufacturing and Supply Chain
The budget continues its focus on boosting domestic manufacturing by securing a stable supply of critical minerals essential for EV batteries and other industrial applications. After exempting Basic Customs Duty (BCD) on 25 critical minerals in the previous budget, the government has now extended full exemptions to cobalt powder, lithium-ion battery waste, lead, zinc, and 12 other critical minerals. This move is expected to lower input costs for manufacturers while creating new employment opportunities in mining and processing industries.
Additionally, to encourage local battery manufacturing, the budget proposes exemptions on 35 capital goods used in EV battery production and 28 capital goods for mobile phone battery manufacturing. This step will significantly reduce India’s reliance on imported lithium-ion cells and strengthen its position as a global battery manufacturing hub.
Sharing his views, Shailesh Chandra, President of SIAM said, “As the Auto Industry transits into cleaner powertrains, in line with the Hon’ble PM’s vision on sustainable mobility, it will specifically benefit from the National Manufacturing Mission, which supports clean tech manufacturing for batteries, motors and controllers. Furthermore, the exemption of critical minerals (e.g. Cobalt, Lead, Zinc etc.), scraps of Lithium-ion battery, and 35 additional capital goods from customs duty, will help create a strong EV ecosystem in the country.
The Export Promotion Mission and support for integration with global supply chains are critical initiatives that will enable Indian manufacturers to expand export footprints, and align with global supply chains.
The Auto Industry is also thankful to the Government for creating a high-level committee for regulatory reforms, aimed at reviewing regulations, certifications, licenses, and permissions, as this will certainly help in ease of doing business in our sector.”
Adding to this, Jyoti Malhotra, Managing Director of Volvo Car India, said “The emphasis on domestic value addition for EV batteries and the development of a comprehensive EV ecosystem, including battery recycling, customs duty exemption on 35 capital goods for EV battery manufacturing and charging infrastructure, are encouraging initiatives that should drive EV adoption across various segments. By focusing on demand-side incentives, without placing an undue burden on taxpayers, the budget seeks to create a favorable environment for EV growth. Overall, the budget seems to be forward-looking and focused on sustainable economic development.”
Electric Vehicles and Clean Technology Get a Major Boost
A new National Manufacturing Mission for Clean Tech has been launched to drive domestic value addition in key components such as EV batteries, motors and controllers, electrolyzers for green hydrogen, solar PV cells, wind turbines, and grid-scale batteries. By offering targeted incentives, the government is ensuring that Indian manufacturers can compete in the global clean energy market.
Supporting this, FADA President, C S Vigneshwar, said, “The National Manufacturing Mission and incentives for solar, EV batteries, and clean mobility infrastructure will accelerate the growth of the EV sector while making India a global hub for sustainable mobility. Additionally, the increase in FDI for insurance to 100 per cent will bring more competition and innovative financing options for auto buyers, further stimulating demand.”
The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has also been extended to provide continued incentives for EV adoption, particularly in the two-wheeler and commercial vehicle segments. Alongside, the budget encourages public-private partnerships (PPP) to expand charging infrastructure, which remains a key hurdle in mass EV adoption.
“We commend the 2025 Union Budget for its continued support of robust consumption growth through changes in the tax structure, effectively placing more disposable income in the hands of the Indian consumer. This will encourage private sector capex to move in a positive direction.
The theme of "Make in India for the world" remains a key focus in this budget, with efforts to reduce India's manufacturing costs poised to significantly enhance the country's global competitiveness. In addition to providing an immediate stimulus for demand and growth, the budget emphasizes long-term growth through substantial infrastructure investments and a strong focus on innovation.” said Dr. Anish Shah, Group CEO & MD of Mahindra Group
Support for the Automotive Industry: Lower Import Duties and Market Growth
Recognising the importance of a thriving automotive industry, the budget has introduced import duty reductions on premium motorcycles and cars, making high-end vehicles more affordable. The import duty on completely built-up (CBU) motorcycles above 1600cc has been reduced from 50 to 30 per cent, while semi-knocked down (SKD) motorcycles will now be taxed at 20 per cent, instead of 25 per cent. Similarly, CBU cars above 1600cc will see a reduction in import duty from 50 to 30 per cent. This move is expected to benefit global luxury brands operating in India and attract more foreign investments in the premium vehicle segment.
The budget also places emphasis on research and development, offering incentives for innovation in battery technology, hydrogen fuel cells, and next-gen automotive solutions. These measures will enable Indian companies to stay competitive in an evolving global automotive market.
Incentives for Electronics & Semiconductor Manufacturing
The government continues its focus on deepening localisation in electronics manufacturing, a crucial sector for modern vehicles. The budget increases customs duty on imported interactive flat panel displays (IFPDs) from 10 to 20 per cent while reducing duty on open cells for LCD and LED TVs to 5 per cent to promote domestic production. These measures align with India’s broader Make in India and Atmanirbhar Bharat initiatives, encouraging local production of high-value automotive electronics.
Rajeev Chaba, CEO Emeritus, JSW MG Motor India, said “The Union Budget’s new tax regime introduces substantial relief for young earning professionals and this is a positive sign for all consumer-facing industries. On the automotive front, the Government's focus on enhancing domestic manufacturing capabilities and battery production will help India’s emerging EV market and boost local manufacturing.”
Boosting Exports and International Trade
Recognising exports as a key growth driver, the government has launched an Export Promotion Mission with sectoral and ministerial targets to integrate domestic manufacturing with global supply chains. A Digital Public Infrastructure for International Trade will be set up to facilitate financing solutions for exporters. Additionally, a national framework will guide states in promoting Global Capability Centers (GCCs) in Tier-2 cities, expanding India’s footprint in global trade and R&D.
Speaking on the Budget, Shradha Suri Marwah, President of ACMA, said, “The Union Budget 2025-26 is forward-looking and growth-centric, reinforcing the government’s commitment to strengthening India’s manufacturing sector and driving the transition to cleaner mobility solutions. The focus on MSMEs, innovation, exports and supply chain resilience will provide a strong impetus to the auto component industry. Further, the proposals for personal Income Tax will put more money in the hands of people thus fuelling consumption leading to economic growth.”
Power Sector Reforms to Support Auto and EV Growth
To strengthen electricity distribution and ensure a reliable power supply for EV charging infrastructure, the government has introduced incentives for states to reform power distribution and enhance transmission capacity. States making significant progress will receive an additional borrowing allowance of 0.5 per cent of GSDP. This reform is expected to reduce power sector inefficiencies and ensure seamless integration of renewable energy into the grid.
Summarising the Union Budget 2025-26, Dheeraj Hinduja, Executive Chairman, Ashok Leyland, said “The budget prioritises extensive national infrastructure development and accelerates the digitisation of the economy. Continuous government investments in infrastructure are set to fuel sustained economic growth. Additionally, the government's strong commitment to green mobility is expected to create new avenues for innovation and growth across the country. With strategic investments in skilling, digitisation, healthcare, education, agriculture, and electrification, the budget aims to shape India’s economic trajectory in the years ahead.”
A Transformative Budget for India’s Auto Sector
The Union Budget 2025-26 marks a pivotal moment for the Indian automotive sector, with a clear focus on EV adoption, clean technology, and manufacturing localisation. The government’s push towards critical mineral security, battery production incentives, and infrastructure development sets the foundation for a self-reliant and globally competitive automotive industry. While stakeholders continue to seek GST rationalisation for EVs and additional long-term incentives, the current budget lays a strong roadmap for sustained growth and innovation in India's mobility ecosystem.
