Updated 17:13 IST, January 30th 2025
EV Push, Tax Cuts and Policy Boosts: Auto Industry's Big Bang Expectations From Budget 2025
Most of the industry players are pushing for lower GST)rates on EV components such as batteries and chargers, along with increased incentives for EV buyers
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As the Union Budget 2025 approaches, the Indian auto industry is hoping for policy reforms, tax reliefs, and incentives to drive growth, innovation, and sustainability. With the sector being a key contributor to the country’s GDP and employment, industry leaders are urging the government to come up with measures that support electric mobility, local manufacturing, and infrastructure development.
"If there are consumption boosting measures in the Budget, then that will help also navigate some of the not so great external situations that all of us face," said P.B. Balaji, CFO, Tata Motors . Spelling out expectations from the upcoming budget, he said anything that can be done to address the stress and turbocharge growth will boost the automotive sector.
1. Boost for Electric Vehicles (EVs)
Most of the industry players are pushing for lower Goods and Services Tax (GST) rates on EV components such as batteries and chargers, along with increased incentives for EV buyers to accelerate adoption. Furthermore, many of them are seeking a reduction in import duties on battery cells and incentives for setting up local battery manufacturing under the Production-Linked Incentive (PLI) scheme.
As Santosh Iyer, Managing Director & CEO, Mercedes-Benz India puts it, "Continued push for BEV adoption by pursuing the existing incentives, infrastructure development and R&D initiatives will be crucial in accelerating India’s transition to green mobility, positioning us as a key player in the global BEV value chain."
2. Tax Reforms and GST Rationalization
Many of the legacy players are calling for a uniform 18 percent GST rate on all vehicles, as opposed to the current 28 percent GST on petrol and diesel vehicles. Some of them, especially Japanese players, are also expecting a lower GST on hybrid vehicles, which currently face the same tax rate as internal combustion engine (ICE) vehicles, despite being a cleaner alternative.
There is also a demand for a higher tax deduction limit on vehicle loans, particularly for EVs, to encourage more consumer interest in sustainable mobility.
According to Piyush Arora, MD & CEO of Skoda Auto Volkswagen India, the upcoming Union Budget presents an opportunity to address some pressing needs of the automotive sector. In his view, "A long-term vision for favorable tax structure catering to different automotive technologies would certainly benefit the industry. The product development cycles are quite lengthy and require substantial investment which needs to be considered. Simplifying the GST structure for the different classes of vehicles & components is another ask.
3. Incentives for Local Manufacturing & Auto Components
The auto sector also expects additional PLI benefits for the manufacturing of components such as semiconductors, batteries, and advanced automotive technologies. Many are also of the view that a reduction in customs duties on key imported components will help automakers manage costs, especially for hybrid and electric vehicle production.
"Encouraging investments in R&D and strengthening the domestic supply chain for EV components will play a pivotal role in reducing reliance on imports and fostering innovation. Supporting a robust mobility ecosystem and advancing digital transformation can stimulate economic growth while aligning with global sustainability goals," said Nagesh Basavanhalli, Vice Chairman, Greaves Cotton Limited.
4. Infrastructure Development & Road Safety
The industry is also keen on higher allocations for EV charging stations, especially on highways and in urban areas. Incentives for private and commercial charging infrastructure are also on the wishlist of many comcerned stakeholders.
Automakers are also advocating for increased government spending on road infrastructure, which is crucial for improving supply chain efficiency and enhancing overall vehicle safety.
5. Support for Commercial Vehicles & Logistics
The Commercial Vehicle (CV) sector expects higher incentives for fleet modernization, which will help replace older, polluting vehicles with cleaner and more efficient alternatives. Industry leaders are also calling for lower road taxes and toll charges for electric and CNG-powered CVs to encourage a shift toward greener logistics.
Additionally, some are also of the view that rationalizing fuel taxation and reducing excise duties on petrol and diesel are being sought by certain stakeholders in order to ease operational costs for logistics and transportation companies.
"Industry experts are hoping for increased incentives and subsidies, especially for the E-truck segment, which is poised to revolutionize logistics and transportation. With growing demand for electric three-wheelers, which provide an affordable and eco-friendly transportation alternative, the industry anticipates the government will focus on expanding incentives for both manufacturers and consumers," said Uday Narang, Founder and Chairman, Omega Seiki Private Limited.
Conclusion
As the government prepares to unveil Budget 2025, the auto industry remains hopeful for policy interventions that will drive sustainable growth, enhance local manufacturing, and accelerate the transition to cleaner mobility. As per industry experts, with the right mix of incentives and reforms, the sector can continue to be a major driver of economic progress while contributing to India’s green mobility goals.
Published 17:01 IST, January 30th 2025