Union Budget 2025-26: Will Vehicles Become Cheaper or Costlier?

With the Union Budget 2025-26 connected the horizon, stakeholders are anxious to recognize however caller policies volition interaction conveyance affordability and the wide industry. Central to these expectations are measures promoting eco-friendliness, innovation, and employment generation. The large question
remains: Will the Budget marque vehicles costlier oregon cheaper?

Boosting home manufacturing done incentives

India’s reliance connected imported lithium-ion cells, chiefly from China, is simply a situation for the section EV industry. To tackle this, successful Budget the authorities whitethorn present incentives nether the ‘Aatmanirbhar Bharat’ initiative, promoting section manufacturing by allocating funds to existing PLI and
other inducement schemes similar PM E-DRIVE, SMEC, etc. This volition alteration manufacturers to proceed passing the benefits by mode of terms simplification for the components and yet a simplification successful terms of eligible automotive vehicles (primarily EVs).

Further, the authorities is deliberating to supply incentives for artillery constituent manufacturing and presently successful the process of identifying locally produced artillery components that request fiscal support. More clarity with respect to what each components person been identified till present volition help
industry priortise manufacturing specified components and volition springiness an accidental to the car archetypal instrumentality manufacturers (OEMs) to optimise their outgo of procurement for specified components and thereby giving an accidental to trim prices of eligible automotive vehicles (primarily EVs oregon HEVs) for extremity customers.

Disincentivising imports by Customs work complaint rationalisation

Rationalising customs duties connected EVs, automotive components, and artillery components is different anticipated determination aiming to fortify the industry’s foundation. This volition alteration home manufacturers to assertion a bigger pastry successful planetary proviso chain, however, determination is simply a hazard of summation in
prices of the goods manufactured utilizing the imported components.

Expanding EV infrastructure

Creating a robust EV infrastructure is captious for India’s modulation to sustainable mobility. While the PM E-DRIVE strategy has already laid the groundwork by emphasising infrastructure development, determination is inactive a request to code artillery recycling and discarded management. Introducing innovative ownership options, specified arsenic artillery leasing oregon subscription models, could little the archetypal outgo of EVs, broadening
their appeal.

GST policies and pricing dynamics

Although GST assembly is the determination shaper for each the matters relating to GST and the timing for announcements related to GST rates are kept abstracted than the Union Budget announcements. Therefore, determination is improbable to person immoderate interaction connected GST outgo of automobiles successful this Union Budget.

Conclusion: The roadworthy ahead

Motor conveyance prices successful India are shaped by a assortment of interconnected factors, including planetary commodity prices, import duties connected earthy materials, proviso concatenation disruptions, and taxation policies. Experts foretell a rise successful rider car prices by the extremity of 2025 compared to 2024, owing to
anticipated hikes successful taxes, import duties, and security premiums, coupled with the ongoing escalation of planetary commodity prices and persistent proviso concatenation challenges

The Union Budget 2025-26 presents a captious accidental for the authorities to power the trajectory of India’s automotive sector. By addressing the issues mentioned above, the authorities tin onslaught a equilibrium betwixt conveyance affordability and sustainable growth.
The cardinal question is: Will vehicles go much affordable oregon expensive? The reply lies successful however efficaciously the fund tackles the challenges of rising costs and proviso concatenation disruptions portion fostering a competitory situation for manufacturers. By implementing policies aimed astatine reducing
production costs, promoting innovation, rationalising taxes and supporting sustainable practices, the authorities tin power the affordability of vehicles and boost user confidence. Having said that, it is recommended that the authorities workout owed caution portion utilizing import duty
rationalisation to boost manufacturing successful India, connected relationship of the anticipation of summation successful the prices of car components and vehicles successful the abbreviated run.

Saurabh Agarwal and Parul Nagpal are taxation partners astatine EY India