Budget Impact on Automobile sector-2025

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces several measures poised to significantly influence India’s automobile sector, with a pronounced emphasis on promoting electric vehicles (EVs) and bolstering domestic manufacturing.

Key Announcements:

1. Custom Duty Waivers for EV Battery Manufacturing: The government has waived customs duties on 35 capital goods essential for EV battery production. This move aims to reduce production costs and encourage the adoption of electric mobility.
2. Enhanced Allocation for Production-Linked Incentive (PLI) Scheme: An allocation of ₹2,819 crore has been earmarked for the PLI scheme targeting the automobile and auto components sector for FY 2026. This initiative is expected to boost local manufacturing of vehicles, especially those powered by electric and hydrogen fuel cells, and their associated components.
3. Income Tax Reforms: The budget proposes increasing the income tax exemption limit to ₹12 lakh (₹12.75 lakh including standard deduction for salaried individuals). This adjustment is anticipated to enhance disposable incomes, potentially spurring increased consumer spending on automobiles. 

Impact Analysis:

• Promotion of Electric Vehicles: The removal of customs duties on key capital goods for EV batteries is expected to lower manufacturing costs, making EVs more affordable for consumers and accelerating their adoption. This initiative underscores the government’s commitment to sustainable and green mobility solutions.
• Boost to Domestic Manufacturing: The augmented funding for the PLI scheme is set to incentivize domestic production of advanced automotive technologies, reducing reliance on imports and fostering innovation within the country.
• Increased Consumer Spending: The proposed income tax reforms are likely to leave consumers with more disposable income, which could translate into higher demand for both traditional and electric vehicles, benefiting the overall automobile market.

Comparison with Previous Budget:

The 2024 budget laid the groundwork by supporting the PLI scheme and exempting import duties on essential minerals for EV batteries. The 2025 budget builds upon these initiatives, reinforcing the government’s dedication to promoting clean energy and sustainable transportation.

Future Outlook:

With these strategic measures, the automobile sector is poised for a transformative phase, characterized by increased EV adoption, strengthened domestic manufacturing capabilities, and heightened consumer demand. The budget’s focus on sustainability and innovation sets a promising trajectory for the industry’s growth in the coming years.