EV industry welcomes Union Budget's push on local manufacturing and customs duty exemptions on batteries

Budget 2025

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has drawn strong reactions from India’s electric vehicle (EV) and clean technology sectors.

Industry leaders have largely welcomed the government’s emphasis on domestic manufacturing, customs duty exemptions, and sustainability-focused initiatives.

A key highlight of the budget is the focus on reducing battery costs by exempting customs duties on lithium-ion batteries and other critical materials.

Dinesh Arjun, Co-founder and CEO of Raptee sees this as a major step toward making EVs more affordable.

"Batteries account for 30-40 percent of an EV’s cost. The exemptions will encourage investment in domestic battery manufacturing, making EVs more accessible across segments," he said.

In a move to strengthen domestic manufacturing of lithium-ion batteries, the government has announced an expansion of the list of capital goods eligible for customs tax exemptions.

The revised list now includes 35 additional capital goods for electric vehicle (EV) battery production and 28 additional capital goods for mobile phone battery manufacturing.

"To the list of exempted capital goods, I propose to add 35 additional capital goods for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing. This will boost domestic manufacture of lithium-ion battery, both for mobile phones and electric vehicles," Finance Minister Nirmala Sitharaman said.

The budget also aims to reduce India's reliance on battery imports by promoting lithium-ion battery recycling.

"Enabling low-cost processing of battery scrap will position India as a global leader in the circular economy. This aligns perfectly with the 'Make in India' initiative and the recently approved Critical Mineral Mission," Utkarsh Singh, Co-founder & CEO of BatX Energies said.

Industry players also highlighted the broader clean energy vision in the budget.

Sudhir Mehta, Founder and Chairman of EKA Mobility, pointed out that exemptions on 12 key minerals—including cobalt powder, lead, zinc, and lithium-ion battery waste—will strengthen India’s cleantech ecosystem.

He emphasised the role of initiatives such as the National Manufacturing Mission in fostering long-term sustainability and economic competitiveness.

The introduction of 35 additional capital goods for EV battery manufacturing was another widely appreciated measure. Shreyas Shibulal, Founder and CEO of Numeros Motors, described it as a decisive step toward localising production and generating high-value jobs. "This budget signifies a strategic shift from traditional subsidies to a more sustainable growth model," he said.

From a broader industry perspective, Rahul Mishra, Partner at Kearney, noted that the budget strengthens both demand and supply for the automotive sector. "Support for agriculture, rural development, and MSMEs will boost affordability, particularly for two-wheelers and mass-market vehicles," he explained.

The government has not allocated funds for the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme in the Union Budget 2025, indicating a shift in EV policy and its gradual phase-out. Instead, Rs 4,000 crore has been allocated to the newly introduced PM Electric Drive Revolution In Innovative Vehicle Enhancement (PM E-DRIVE) Scheme.

Last year, the FAME scheme had received Rs 2,058 crore, down from Rs 3,921 crore the year before, indicating a gradual phasing out of the programme, according to the expenditure budget document published during the Union Budget presentation on February 1.

"The industry is now very much prepared for the slow phasing out of FAME scheme. However, we are awaiting more details on the PM E-Drive scheme," said an industry source.