Budget 2024-25 on Automobile Industry Highlights: Finance Minister Nirmala Sitharaman took guard on Tuesday, July 23 for the seventh time in a row to present the Union Budget. It was the first budget for Modi 3.0 and National Democratic Alliance (NDA) after winning the 2024 Lok Sabha elections.
With the Indian Government’s ambitious EV adoption target to make 30 per cent of the total sales of vehicles EVs by 2030, the new Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME III) could increase the subsidies for EV buyers, encourage companies to set up battery manufacturing plants in India and research and development in battery technology, increase EV commercial vehicles and a comprehensive Battery Swapping policy. This will also be on the lines to strengthen the government’s Make in India initiative.
There could be a restructuring in the Goods and Services Tax (GST) keeping hybrid vehicles in mind which are taxed at 43% just below 48% tax on internal combustion engine automobiles (petrol and diesel) and changes in policy for alternative fuels like biofuels and CNG. The budget is also expected to introduce new subsidies on Vehicle Scrapping Policy.
Automobile Budget 2024 Highlights
“I am very pleased with the 2024 budget which includes custom duty reduction because this move will lower the price of EVs making them more affordable and accessible to all”, said Prashant Vashishtha, Chairman and Managing Director (CMD) of Sokudo Electric India The cost reduction on custom duties on EV components will help the EV manufacturers which will further benefit to the customers.
According to the recent development in the budget if custom duties on lithium-ion batteries are reduced by 10% it will release the burden on the manufacturers by reducing the overall cost of production. Moreover, this initiative aligns with the government’s vision of promoting sustainable transportation solutions across the nation. Additionally, the fall in EV prices will lead to demand for the adoption of electric vehicles across India, contributing to a cleaner environment and also reducing the dependency on fossil fuels.
Ayush Lohia, CEO, Lohia, said “The government’s focus on MSME support and job creation in manufacturing aligns perfectly with the Industry expectations. The new scheme incentivizing job creation in manufacturing, with EPFO contribution reimbursements for employers, is expected to significantly benefit manufacturers across various sectors. This could lead to increased production capacity and job opportunities, with 30 lakh youth and their employers set to benefit.”
Finance Minister Nirmala Sitharaman has waived import duties on 25 minerals, including lithium, which is expected to lower the manufacturing costs of batteries. This will, consequently, reduce the prices of electric vehicles for consumers.
“Government is incentivizing the job creation in the manufacturing sector which is likely to impact 30 lakh youth. We expect that these additional skilled workers with disposable income in hand will help in driving growth in the automotive industry in the 2-wheeler segment,” said Rajat Mahajan, Partner, Deloitte India.
Finance Minister Nirmala Sitharaman announces investment on 1000 industry industrial training centres, including Hub-and-Spoke, which will fulfil the high requirement for a specialized workforce.
Many stakeholders expect significant investments in charging infrastructure to address range anxiety and promote EV usage. “Development of public EV charging infrastructure (with fast charging capabilities) as hotspots in the cities is critical to be covered under FAME III and help accelerate the EV adoption,” says Anmol Singh Jaggi, Co-Founder, BluSmart.
To accelerate EV adoption, many of stakeholders have voiced their opinion on including private buses and commercial vehicles under FAME. Sridhar V, Partner, Grant Thornton Bharat, explains, “The incentive to Government or State-owned corporation owned buses should be extended to Privately owned buses also as they significantly help in intercity commute and are used favourably by the passengers.”
There are various reasons for the decline in EV sales in the last couple of months. One of the major reasons is the end of FAME II, but the long-term issue is the high 18% GST on battery packs. The Society of Manufacturers of Electric Vehicles (SMEV) believes that GST on battery packs should be reduced from 18% to 5%.
To give a boost to the government’s EV policy, the third version of FAME (Faster Adoption for Manufacturing of Hybrids and Electric Vehicles) is expected to introduce more incentives to boost both urban and rural economies. Vinod Aggarwal, President of Society of Indian Automobile Manufacturers (SIAM), said that the automotive industry is key for the growth of the economy and he’s expects to see a growth-oriented Budget that will focus more on capital expenditure.
All OEMs have been asking the government for at least a 10-year plan on the EV adoption strategy, which will help the companies plan out the necessary investments and future product planning. “There has to be a statement of intent by the government saying that these policies and GST rates will continue for 5-10 years because only then OEMs can invest significantly more on EVs,” said Mercedes-Benz India’s MD & CEO, Santosh Iyer.
