The automotive industry has welcomed the Budget announcement on customs duty exemption for capital goods used in manufacturing of lithium ion batteries that is expected to boost local manufacturing and strengthen the supply chain for India’s transition to clean mobility.
“The industry appreciates the rationalisation of customs duties on key raw materials and the reduction of inverted duty structures, which will make domestic manufacturing more cost-effective. The duty exemption on capital goods for EV battery manufacturing is a strong step toward enabling India’s transition to electric mobility,” the Automotive Component Manufacturers Association (ACMA) of India said in a press statement.
There is also duty elimination on scraps of 12 critical minerals, including copper, cobalt powder and lithium ion battery to provide feedstock to the critical mineral recycling industry at a lesser cost.
Finance Minister Nirmala Sitharaman also announced the setting up of a National Manufacturing Mission covering small, medium and large industries for furthering “Make in India” by providing policy support, execution roadmaps, governance and monitoring framework for Central Ministries and States. Within this framework, support will also be extended to Clean Tech manufacturing. The government will also aim to improve build an ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, very high voltage transmission equipment and grid scale batteries.
The ACMA said that these measures will support development of a robust EV supply chain and promote sustainable mobility solutions.
President of Sociaty of Indian Automobiles, Mr. Shailesh Chandra said in a press statement that the Export Promotion Mission and support for integration with global supply chains was also a critical initiative that will enable Indian manufacturers to expand export footprints, and align with global supply chains.
The credit and loan support extended to the medium and small enterprises that include an enhanced credit guarantee cover from ₹10 crore to ₹20 crore for start-ups is also expected to drive higher financing for fleet expansion in in taxis, transport, and logistics businesses, according to the Federation of Automobile Dealers Association of India. A Fund-of-Funds for Start-ups of ₹10,000 core could also support auto-tech startups, fleet leasing models, and last-mile delivery businesses, according to FADA.
Further the industry is also hopeful that the proposals for personal Income Tax will put more money in the hands of people and fuel consumption and more car sales. Calendar year 2024 saw car sales growth registered its slowest pace in four years at 5% in 2024, amidst weak consumer sentiment.
But expectations for support for enhancing charging infrastructure to promote adoption of EVs were not met.
“Electric Mobility need to achieve faster adoption that warrants immediate action is needed in the form of stronger incentives for fleet electrification and a rapid expansion of charging networks. The industry expected beyond PM E-Drive from Budget to a proactive measure to position India as a competitive global player in the EV market. Recent guidelines on charging infrastructure and battery swapping could have taken mission mode with increase investor confidence and accelerate the transition to EVs.” Mr. Abhijeet Sinha, Project Director-National Highways for Electric Vehicles (NHEV) for the Automobiles & EV Sector.
The industry’s demand for a revision in the GST rates for lithium-ion batteries and EV charging infrastructure to match the 5% GST on electric vehicles were not fulfilled, said Ankit Sharma, CEO & Co-Founder, Vidyuta . While EVs are taxed at 5%, batteries and charging services are subject to an 18% GST.
