The inclusion of cobalt, lithium, lead, zinc, and ion battery scrap in the import duty exemption is expected to reduce production costs for EVs, making them more affordable for consumers. Another significant factor in promoting EV growth is the expansion of domestic lithium-ion battery production. By increasing local production, India could reduce reliance on imports and lower EV costs.

While these steps should boost EV adoption, the industry’s practice of import parity pricing may negatively impact Indian miners of zinc and lead, as they will have to lower prices to remain competitive. Moody’s suggests that a state mining index will enhance transparency in pricing, benefiting miners.

Additionally, the government’s focus on recovering critical minerals from mining tailings is an innovative step toward reducing waste and addressing environmental concerns. However, mining companies may face higher capital expenditures for tailings management.

India’s passenger vehicle industry is forecast to grow at 4% in fiscal 2025-26, supported by economic recovery and increased consumer spending. While EV adoption remains a challenge, the momentum in the automotive sector is expected to continue, driven by the government’s supportive budgetary measures and increasing demand for cleaner vehicles.

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A major step towards strengthening domestic manufacturing is the extension of full exemptions on 25 critical minerals, including cobalt and lithium-ion battery waste. This move is expected to lower input costs for manufacturers and foster growth in mining and processing industries. Additionally, the budget proposes exemptions on 35 capital goods used in EV and mobile battery production to reduce reliance on imports and enhance India’s position as a global battery hub.

Shailesh Chandra, President of SIAM, emphasized that the focus on clean tech manufacturing, including batteries and motors, will significantly benefit India’s growing EV ecosystem. Jyoti Malhotra from Volvo Car India echoed this, highlighting the government’s support for battery manufacturing, recycling, and charging infrastructure as key to driving EV adoption.

To further promote sustainable growth, the government introduced a National Manufacturing Mission for Clean Tech, targeting EV components, solar cells, wind turbines, and green hydrogen electrolyzers. This initiative aims to secure India’s place in the global clean energy market.

The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has also been extended to provide ongoing incentives, particularly for two-wheelers and commercial vehicles. Public-private partnerships will be encouraged to expand charging infrastructure and boost EV adoption.

In addition to boosting domestic manufacturing, the budget cuts import duties on premium motorcycles and cars, making high-end vehicles more affordable. Import duties on motorcycles above 1600cc and CBU cars have been reduced, attracting foreign investments in the luxury vehicle market.

The budget also introduced initiatives to foster electronics and semiconductor manufacturing, with a focus on enhancing domestic production of automotive electronics. Customs duty on interactive flat panel displays has been increased, while duty on LCD and LED TV open cells has been reduced to support local manufacturing.

Exports were another key focus, with an Export Promotion Mission aimed at integrating India’s manufacturing sector with global supply chains. This initiative will be supported by a Digital Public Infrastructure for International Trade and a framework for promoting Global Capability Centers (GCCs) in Tier-2 cities.

Dheeraj Hinduja from Ashok Leyland noted that continued investments in infrastructure and green mobility would fuel long-term economic growth. The budget’s focus on skilling, digitisation, and renewable energy ensures a holistic approach to India’s economic development.

In summary, the Union Budget 2025-26 lays a solid foundation for India’s automotive sector, prioritising EV adoption, clean technology, and manufacturing localisation. These measures, along with export growth and power sector reforms, will support a self-reliant and globally competitive automotive industry in the years to come.

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