This policy could potentially invigorate consumer demand in the automotive sector, particularly among entry-level two-wheeler and four-wheeler buyers.Budget 2025 lays out a framework geared towards immediate incentives to boost domestic spending while maintaining the government’s long-standing emphasis on Make in India and advancing local technologies. There’s spotlight on Clean Tech Manufacturing, set to expand the domestic production of key components like EV batteries, motors, controllers, and electrolysers—a strategic step toward net-zero goals.
A major highlight is the revised income tax threshold that allows individuals to earn up to INR 12 lakh tax-free, with salaried workers enjoying relief up to INR 12.75 lakh. This policy could potentially invigorate consumer demand in the automotive sector, particularly among entry-level two-wheeler and four-wheeler buyers.
In terms of manufacturing costs, the budget refines customs duties on various automotive imports, adding 35 capital goods for use in the manufacture of Lithium ion battery of EVs to the fully exempted list. This move is likely to foster a robust battery manufacturing ecosystem, benefiting companies approved under both the ACC PLI and automotive PLI schemes, which require significant domestic value addition. Still, some in the industry had hoped to see similar tariff tweaks for alternative battery chemistries like sodium-ion or multi-ion, given India’s continuing dependence on imports.
Motorcycles also see a duty adjustment: completely knocked down (CKD) and semi-knocked down (SKD) kits for ICE models now incur a 5% lower tariff, potentially spurring in-country assembly. Premium bike manufacturers may be attracted by reduced tariffs on completely built-up (CBU) units, where motorcycles above 1600 cc are taxed at 30%, and those at or below 1600 cc at 40%, both plus applicable surcharges. Electric motorcycle rates remain unchanged.
Meanwhile, the removal of social welfare surcharges alongside the introduction of AIDC leaves effective rates for many four-wheeled vehicles and luxury models more or less unchanged. Nevertheless, there is a slight 2.5% drop in basic customs duty on car seats.
The expansion of zero-duty imports for additional EV battery manufacturing capital goods could further reduce the cost of producing advanced battery packs, motors, and chargers, allowing local manufacturers to scale at a faster pace. By encouraging local manufacturing while easing certain import constraints, the budget paves the way for broader adoption of electric vehicles and moves India closer to cleaner, lower-emission transport.
Some industry expectations—such as GST rationalisation, extension of PM E-drive, and a second phase of the PLI program—remain unmet, but the measures introduced should help spark near-term demand, reinforce new technologies like EVs, and set in motion a broader developmental trajectory benefiting MSMEs, exporters, and education from the ground up.
