Budget 2025-26: Boosting Domestic Manufacturing in the Automobile Sector

The 2025 budget aims to boost lithium-ion battery production through capital goods exemptions, aiming to reduce costs and imports.

The recent budget has brought positive news for the Indian automobile industry, particularly focusing on electric vehicles (EVs) and mobile phone manufacturing. A significant boost has been given to lithium-ion battery production, a crucial component for both EVs and mobile phones. The government proposes to add 35 capital goods to the exemption list for EV battery manufacturing and 28 for mobile phone battery manufacturing. This move is expected to incentivize domestic production and reduce reliance on imports, making India a more competitive player in the global battery market. This should ultimately lead to lower costs for both EVs and mobile phones.

Furthermore, the budget addresses import duties on motorcycles, differentiating between engine capacities and import conditions (Completely Built Unit, Semi-Knocked Down, and Completely Knocked Down). For motorcycles with engine capacity not exceeding 1600cc, the customs duty reduces to 40 per cent from 50 per cent for CBUs, to 20 per cent from 25 per cent for SKDs, and to 10 per cent from 15 per cent for CKDs.

For motorcycles with engine capacity of 1600cc and above, the customs duty has also been revised. The CBU duty now stands at 30 per cent from 50 per cent, the SKD duty has been reduced from 25 per cent to 20 per cent, and the CKD duty has been reduced from 15 per cent to 10 per cent. This could potentially make larger engine capacity motorcycles slightly more affordable, particularly those assembled in India. These changes signal the government's intent to encourage local assembly and manufacturing within the automobile sector.

Disclaimer: The article is for informational purposes only and not investment advice.