As the Union Budget 2025 is just a couple of days away, stakeholders across the auto sector are eager for measures to address the industry's challenges while fostering long-term growth. Domestic sales of passenger and commercial vehicles have slowed this fiscal year, with rural consumption recovering but urban demand lagging. To ensure balanced growth, industry experts emphasize the need for policies that enhance disposable income, generate employment, and support rural welfare.
The government’s commitment to infrastructure development has been a key driver for the sector. With Rs 11.11 trillion allocated in the previous budget toward roads, railways, and ports, progress in infrastructure has a direct bearing on the commercial vehicle industry and its components. However, national highway construction has been the slowest in four years, exacerbated by the election-related slowdown. Increased allocation and faster execution of infrastructure projects in this budget could stimulate demand for commercial vehicles and related industries.
Follow our LIVE blog for all the latest market updates
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.
"With the upcoming Budget, we expect measures that will help accelerate India’s transition to electric mobility. A focus on expanding charging infrastructure in underserved areas through viability gap funding, grants, and rebates for homeowners would be beneficial," Kamlesh Kaushik, CEO and Co-Founder of Mufin Green Infra said. "To address the high upfront costs of charging stations, we hope for increased subsidies and tax incentives, such as accelerated depreciation and electricity tariff exemptions. Additionally, reducing import duties on EV components and offering incentives for local manufacturing will support growth," he added.
"Simplifying the GST structure with a uniform 5 percent tax across EVs, components, and charging infrastructure is essential to reducing costs and fostering growth," said Dinkar Agrawal, Founder, CTO & COO, of Oben Electric, a motorcycle company that designs, develops, and manufactures electric motorcycles and other EV components. He also emphasized the importance of resolving the inverted GST structure on raw materials to ease working capital pressures and promote sustainable manufacturing.
Also read: DeepSeek brings focus back on data security concerns over Chinese apps
Further, experts highlight the need for incentives to support local manufacturing. "Addressing delays in PLI disbursements and relaxing value addition norms could boost domestic participation," Axis Securities said in a recent note. Expanding incentives to include electric passenger car manufacturing and introducing performance-linked incentives for batteries and components are seen as critical steps for India to achieve its Rs 20 lakh crore EV market potential by 2030.
Hybrid technology, too, is being positioned as a transitional solution. Stakeholders suggest lowering the GST on hybrid vehicles, currently taxed at 28 percent, to make them a viable alternative while the EV ecosystem matures. Similarly, reducing the GST on entry-level two-wheelers could benefit consumers in Tier-II and Tier-III cities, where public transportation remains inadequate.
Beyond EVs, the industry seeks a broader push for clean technologies. Production Linked Incentive schemes for advanced chemistry cell batteries have already drawn investments, but extending such incentives to areas like green hydrogen, biofuels, and biogas could encourage further innovation. "Classifying charging infrastructure as an ‘infrastructure industry’ can enable affordable financing, critical for advancing India’s transition to sustainable mobility," suggested another industry insider.
The current GST disparity remains a significant challenge. While EVs are taxed at a favorable 5 percent, components are taxed at 18 to 28 percent, creating inefficiencies. A reduction in GST rates for EV batteries, which constitute 40-50 percent of a vehicle's cost, could significantly lower prices and support manufacturers.
As the sector eyes the budget, stakeholders are clear in their expectations: policies that create a conducive ecosystem for both manufacturing and consumption.
In the last three months, Tata Motors, India’s leading electric vehicle maker, has faced a steep decline, with its stock plunging over 18 percent. In contrast, Maruti Suzuki has delivered a steady performance, gaining 5 percent during the same period. Mahindra & Mahindra, the top-performing Nifty 50 company of 2024, added 4 percent to its share price. Meanwhile, Hyundai Motor India, the latest entrant to the primary market, has seen its stock dip 7 percent, reflecting the mixed sentiment in the auto sector.
However, February 1 could mark a turning point. If the proposed measures to accelerate EV adoption find their way into the Union Budget, these stocks could witness a significant rebound, reigniting investor optimism in the sector.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
