Union Budget 2025-26: Key Reforms Boost India’s Auto Industry

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, underscores India’s commitment to advancing its automotive sector with targeted policy reforms. These initiatives aim to make India a leader in sustainable mobility, with a strong emphasis on electric vehicles (EVs), clean energy, and boosting domestic manufacturing.

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.