Budget 2024: Auto sector betting on higher allocation for rural spend, FAME III rollout

The government's target of having 30 percent electric vehicles on the road by 2030 hinges on the expansion of the FAME program

The auto industry is betting that the upcoming Budget will place a greater emphasis on boosting rural income, which could drive an uptick in demand for automobiles, especially for two-wheelers.

Also, the prospects for a rural recovery appear bright given the forecast for a normal monsoon.

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Broadly, it is the two-wheeler segment on which the auto industry is pinning its hopes.

Two-wheelers, which have led the industry growth for the last few quarters, are hoping for targeted incentives like FAME 3.0 (Faster Adoption and Manufacturing of Electric Vehicles). Such incentives could make electric two-wheelers more affordable and accelerate their adoption.

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Morgan Stanley's Binay Singh suggests that two-wheelers, three-wheelers, and e-buses will be key focus areas for the government as the current Electric Mobility Promotion Scheme (EMPS) ends on July 31, 2024.

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"We anticipate more support for local battery production and innovation, which are critical for the sustainability and cost-effectiveness of EVs. Increased backing for the 'Make in India' initiative and the localized manufacturing of electric two-wheelers could enable Indian manufacturers to create efficient and sustainable mobility solutions that compete with international brands," said Chakravarthi C, Managing Director of Quantum Energy.

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Prassann Daphal, CEO at Recyclekaro, believes the government's target of having 30 percent electric vehicles on the road by 2030 hinges on the expansion of the FAME program, which the EV industry is actively advocating for.

He added, "A specialized PLI plan for recycling lithium-ion batteries is being proposed. This plan aims to encourage the growth of the recycling industry and significantly contribute to India's sustainability goals. The government could support this initiative by extending the PLI scheme to encompass the entire value chain, from manufacturing to recycling."

The major players in the segment have seen their share slip up to 3 percent in the last month. Hero MotoCrop has been the worst performer over the same period.

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