Finance Minister Nirmala Sitharaman’s presentation of the Indian Union Budget 2025 introduces several initiatives that could significantly influence the country’s automotive sector. From tax reforms to EV incentives and support for local manufacturing, the budget brings promising developments for the industry.

How Does The Budget 2025 Affect The Automotive Industry?

One of the most notable announcements is the increase in the income tax exemption limit to ₹12 lakh (₹12.75 lakh for salaried individuals, including the standard deduction). This change is expected to boost consumer disposable income, potentially increasing demand for two-wheelers, three-wheelers, passenger cars, and other vehicles.

Promoting Electric Mobility

The government is prioritizing EV affordability by waiving customs duties on 35 capital goods essential for EV battery production. This move aims to lower manufacturing costs, ultimately making electric vehicles more budget-friendly for consumers.

Production Linked Incentive (PLI) Scheme

The PLI scheme is designed to encourage domestic manufacturing, particularly in electric and hydrogen fuel cell-powered vehicles and their components. By reducing costs, creating jobs, and strengthening supply chains, the initiative seeks to make India’s auto industry more competitive.

For 2025, the government has allocated ₹2,819 crore to the auto and component sector, slightly lower than ₹3,500 crore from the previous year. However, this funding will still enable technological advancements and industry growth.

Other Key Measures

• Boost to Rural Demand: Initiatives like the Dhan-Dhaanya Krishi Yojana and an increase in Kisan Credit Card limits are expected to raise rural incomes, driving demand for tractors, two-wheelers, and small commercial vehicles.
• Support for MSMEs: Given their crucial role in the auto supply chain, the budget enhances credit guarantees, making it easier for auto component manufacturers and dealerships to access financing, expand operations, and invest in new technologies.

With a strong focus on tax relief, EV expansion, domestic manufacturing, and MSME support, Budget 2025 lays a solid foundation for the automotive sector’s growth, reinforcing India’s position in the global auto market.