Finance Minister Nirmala Sitharaman announced the Union Budget for the fiscal year 2024-25 on Tuesday, July 23. Surprisingly, she did not mention the automotive sector directly in her statement, however, some key takeaways were raised in Parliament regarding customs duties, local production units, and a green ecosystem related to the automotive sector. Here’s everything you need to know.
Impact on the electric vehicle industry
‘Electric Vehicles’ is a growing topic in India today. The Union Budget has made EVs a major focus and has highlighted several points related to the EV industry. Firstly, there is a duty exemption on 25 critical minerals like lithium, cobalt, copper and the BCD exemption for lithium-ion batteries has been extended till March 31, 2026. These elements are widely used in the production of EV batteries and the removal of duty on these elements will make the production of EV batteries cheaper and ultimately make them affordable for EV owners.
Secondly, the budget cuts the allocation for FAME (Fast Adoption of Manufacturing of Electric Vehicles) from Rs 4,807 crore to Rs 2,671 crore, a reduction of 44%. The FAME scheme facilitates electric vehicle manufacturers to produce electric vehicles at a higher level with the help of incentives provided by the government, thereby reducing emissions and pollution levels in the country. Conversely, the budget increases the allocation for PLI (Production Linked Incentive Scheme) from Rs 600 crore to Rs 3,500 crore to help in the manufacturing of electric vehicles. According to the central government, PLI is more efficient than FAME.
Impact on local manufacturing/production
The Finance Minister stressed on the importance of local manufacturing in his budget speech. Reduction in import duties and cess has encouraged local production of automobiles in India. The Union Budget provides incentives of up to Rs 6,921 crore to local manufacturers including original equipment manufacturers (OEMs) and component manufacturers to enhance their manufacturing capabilities and seek growth in the country, followed by infrastructure support and job creation.
In addition, the Indian automotive industry budget also promotes initiatives such as “Make in India” and “Atma Nirbhar Bharat”. Supporting domestic manufacturers and encouraging foreign automobile brands to set up domestic manufacturing plants in India can promote the concept of local manufacturing and help create employment opportunities for local people.
How we view Budget’25 as a car service company – GoMechani’s view
The Union Budget 25 has included several plans for the production of electric vehicles and emphasizes on ‘Self-Reliant India’ by promoting local manufacturing, which is a good move for a developing country like India. Last year, the Indian automobile industry contributed nearly 49% of India’s manufacturing GDP and produced about 4.9 million passenger cars, 21.5 million two-wheelers, 9.9 million three-wheelers and nearly 1.1 million commercial vehicles. A growing industry like this really needs support from the government. While the reduction in FAME allocation does not seem optimistic, the increase in PLI scheme balances the way out for automakers and other relevant figures. Overall, the Union Budget 25 is quite promising for the country’s electric vehicle industry and job creation.
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