Auto stocks rally as budget boosts EV adoption with Solar PV cells and battery ecosystem

The index has shed nearly 15 percent in the last six months.

Auto stocks surged on February 1 after the Union Budget 2025 introduced measures to accelerate electric vehicle (EV) adoption and ramp up infrastructure. Finance Minister Nirmala Sitharaman announced a slew of initiatives to build an ecosystem for solar PV Cells & EV Batteries. Investors cheered the announcements, driving gains across key auto stocks.

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Maruti Suzuki rallied over 6 percent as the Budget’s focus will also likely benefit the company as it is set to launch its maiden electric vehicle in 2025. The company’s first EV, the E-Vitara, set to launch under its premium NEXA brand, will come with a 500+ km range, advanced safety features, and global market aspirations. The positive momentum also stems from solid January sales which witnessed an uptick of 6.5 percent.

Mahindra & Mahindra, the top-performing Nifty 50 auto stock of 2024, added over 2 percent, buoyed by incentives for local battery manufacturing. The stock has been on an uptrend amid growing demand for its EV. Its January PV sales surged over 18 percent while exports neary doubled. Meanwhile, Hyundai Motor India also advanced 2 percent, also expected to benefit from such initiatives.

Also read: New Income tax bill to be introduced next week, FM Sitharaman says

Tata Motors, India’s largest EV maker, lost over 1 percent, after its January sales fell.

On the electric mobility front, India continues to push for increased EV adoption. The Prime Minister’s E-drive scheme, with an outlay of Rs 109 billion, underscores this commitment, focusing on building a robust ecosystem that includes EV sales, manufacturing, and charging infrastructure. However, challenges such as high battery costs, dependence on imported battery cells, and insufficient charging networks persist.

Hybrid technology, too, was being positioned as a transitional solution. Stakeholders suggested lowering the GST on hybrid vehicles, currently taxed at 28 percent, to make them a viable alternative while the EV ecosystem matures. An announcement of reduction in GST rates for EV batteries, which constitute 40-50 percent of a vehicle's cost, could have significantly boosted sentiment among manufacturers.

Read more: Budget 2025 at a glance: Total expenditure set at Rs 50.65 lakh crore, fiscal deficit target at 4.4% of GDP

With the government’s renewed push for clean mobility and infrastructure development, analysts believe the positive momentum in auto stocks could continue in the coming sessions.

At about 12:50 pm, the Nifty Auto index was trading at 23,256, higher by 1.7 percent from the last close. The index has shed nearly 15 percent in the last six months.

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