Union Budget Impact on Auto Sector: Promotion of Electric Vehicles, Custom Duty Rates Hiked
In the recent Union Budget, the Indian government has announced several measures to promote the adoption of electric vehicles (EVs) and reduce the cost of EV batteries. These measures include:
Extension of customs duty exemption on import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles. This will help to reduce the cost of manufacturing EV batteries in India. Central excise duty exemption on blended compressed natural gas (CNG) from the total amount as is equal to the GST paid on biogas or compressed biogas contained in the blended CNG. This will make CNG more affordable, which could encourage more people to switch to CNG-powered vehicles. Increase in customs duty rates for petrol, diesel, and electric vehicles manufactured in semi-knockdown (SKD) form from 30% to 35%. This is intended to protect the domestic auto industry from competition from imported vehicles. Increase in customs duty rates for imported completely built unit (CBU) electric vehicles from 60% to 70%. This is intended to further protect the domestic auto industry and encourage the development of a domestic EV manufacturing industry. These measures are expected to have a significant impact on the Indian auto sector. The promotion of EVs is likely to lead to increased demand for EVs, which could benefit EV manufacturers such as Tata Motors and Mahindra & Mahindra. The hike in customs duty rates for imported vehicles is likely to make imported vehicles more expensive, which could benefit domestic automakers such as Maruti Suzuki and Hyundai Motor India.
Overall, the Union Budget is positive for the Indian auto sector. The measures announced by the government are likely to promote the adoption of EVs and reduce the cost of EV batteries. This could lead to increased demand for EVs and benefit both EV manufacturers and domestic automakers.