Union Budget of the Automotive Industry for 2026

1. Electronics Components Manufacturing Scheme will be enhanced to support all vehicles, especially EVs.

1. Dedicated Rare Earth Corridors across India to secure minerals that are critical to the industry.

1. Duty exemptions on capital goods EV components and lithium-ion batteries to strengthen battery supply chains.

1. Excise duty exemption on biogas components of biogas-blended CNG to facilitate cleaner fuel for public, commercial, and fleet transport vehicles.

1. SME Growth Fund of Rs.10,000 crore to encourage auto-component MSMEs in Tier II and III towns.

1. Corporate Mitras in Tier II and III cities to ease compliance, taxation, and regulatory processes for automotive MSMEs.

1. Dedicated freight and waterways corridor that will help reduce logistics expenses and boost sustainability for freight transport.

1. Nationalisation of 20 new waterways across the country to link industrial hubs with mineral-rich zones.

Highlights of the Union Budget 2025

The highlights of the Union Budget 2025 are as follows:

1. Tax Exemptions for EV Battery Manufacturing: The government has fully exempted Basic Customs Duty (BCD) on essential materials like cobalt, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals. This initiative is expected to reduce production costs for EV batteries, making electric vehicles more affordable for consumers.

1. Capital Goods Exemptions: Thirty-five capital goods related to EV battery manufacturing have been added to the list of exempted items. This move aims to foster innovation and reduce production costs in the EV sector.

1. Support for Domestic Manufacturing: The budget outlines measures to support domestic manufacturing of renewable energy components, such as solar panels and wind turbines, to reduce dependence on imports.

1. Skill Development Programs: Resources have been allocated for skill development programs in the renewable energy sector, addressing the need for a skilled workforce.

Union Budget Highlights on Automotive Industry for FY 2024-25

Automobile companies were hoping for financial support to localise their operations in the next budget.

1. The 2023-24 budget report mentioned that the government's Automotive Production Linked Incentive (APLI) program has drawn in investments of Rs. 67,690 crores, with Rs. 14,043 crores invested by 31 March 2024.
2. So far, 85 companies have received approval under this program, which is set to cost Rs. 25,938 crores from FY23 to FY27.
3. However, there were no official announcements about the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-III) scheme, despite the government's budget estimates showing a decrease in funding from Rs. 5,171.97 crore in FY24 to Rs. 2,671.33 crore in FY25 for FAME-III.
4. The five-year FAME-II scheme, which costs Rs. 11,500 crore and ended on 31 March 2024, also saw a decrease in funding.

Interim Budget Highlights on Automotive Industry for FY 2024-25

1. The Electric Vehicle (EV) ecosystem will be broadened and deepened through the expansion of manufacturing and charging infrastructure.
2. Electric buses will receive support through price safety mechanism.
3. Electric vehicle charging provides a business opportunity for vendors for supply & installation jobs for young people with manufacturing, installation & maintenance skills.
4. As part of the government’s green and clean mobility strategy, funds have been allocated for the replacement of government vehicles.
5. Customs duty exemption was extended to the import of capital goods and machinery needed for manufacturing of lithium-ion cells for batteries used in electric vehicles.

Union Budget 2023 Automotive Industry Highlights

1. The Union Budget 2023 eliminates customs duties on capital goods and machinery used to produce lithium-ion batteries for use in electrically powered vehicle batteries (EVs). According to reports, the action will lower the price of EVs in the nation.
2. Green Hydrogen Mission – According to the finance minister, The National Green Hydrogen Mission will ease transition of economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this new industry, with an outlay of Rs.19,700 crores.

1. Basic custom duty changes - The finance minister suggested lowering the basic customs duty rates on goods other than textiles and agricultural products from 21% to 13% in the Union Budget 2023. Due to this, various commodities, notably vehicles, have minimal modifications to the basic custom duties, cesses, and surcharges.
2. Change in personal income tax - The personal income tax rebate cap is raised from Rs.5 lakh to Rs.7 lakh in the Union Budget 2023. It is expected that the salaried population will presumably have more disposable income to spend on items like cars as a result.
3. Scrapping of old vehicles - In line with the Budget 2021–22 policy on car scrapping, the minister announced that she would set aside money for the Central Government's 20-year-old vehicles to be scrapped. She said that states would receive assistance in upgrading outdated cars and ambulances.

Union Budget 2021

Hike in Custom Duty: The customs duty will increase by 15% on certain auto parts. The move will be an advantage for domestic manufacturers and a disadvantage for vehicles that are assembled as a Completely Knocked Down Unit (CKD).

Customs duty has been reduced by 7.5% on steel products. The move will benefit both customers and automobile manufacturers.

Voluntary Scrappage Policy: In order to ensure that the pollution levels are kept in check, a vehicle scrappage policy has been introduced. Under the new policy, vehicles that are more than 20 years old will need to undergo a fitness check. Vehicles that do not pass the test will need to be scrapped.