Union Budget 2024: What The Indian Auto Industry Expects

Updated: Tuesday, July 23, 2024, 11:11 [IST]

The Indian auto industry is eagerly awaiting the Union Budget 2024, which Finance Minister Nirmala Sitharaman will present on July 23rd. The sector has several key expectations that could significantly impact its future.

FAME 3: A Boost for Electric Vehicles

The discontinuation of the FAME 2 scheme, which made electric vehicles (EVs) more affordable, has led to price increases. The industry is now looking forward to the announcement of FAME 3 with an expected allocation of Rs 10,000 crore. This new scheme aims to subsidize EV costs and promote domestic production of essential components.

Madhumita Agrawal, Founder and CEO of Oben Electric, stated, "Recognizing that the Indian EV industry is on the cusp of mass adoption, Oben Electric also supports the rollout of a long-term FAME 3 subsidy scheme. This scheme, however, should feature a simplified access process to ensure participation from EV players without unnecessary hurdles."

Akash Gupta, Co-founder & CEO of Zypp Electric, emphasized the need for policy continuity to achieve net-zero carbon emissions. He said, "Inclusion in the priority lending scheme and reducing GST for EV services from 18% to 5% will accelerate EV-led delivery adoption. Recognizing last-mile delivery as a distinct sector under logistics policies is essential, given that one-third of shipments fall within this category."

Incentives for Hybrid Vehicles

While electric vehicles have received substantial government support, hybrid vehicles have not seen similar attention. Union Minister Nitin Gadkari has suggested reducing GST rates for hybrids from the current 18%.

This move could benefit companies like Maruti Suzuki but might affect EV sales for companies like Tata Motors. Given the government's focus on reducing reliance on traditional fuels, there may be incentives for hybrid technology in the upcoming budget.

Encouraging Vehicle Scrapping

The auto industry seeks increased incentives for vehicle scrapping through bodies like SIAM (Society of Indian Automobile Manufacturers). This policy targets older vehicles that contribute significantly to pollution. Although a scrapping program exists, stakeholders want more substantial incentives, especially for commercial vehicles with higher emission levels.

Bringing Petrol and Diesel Under GST

Fuel prices are a major concern for both consumers and the auto industry. There is a frequent demand to include petrol and diesel under the Goods and Services Tax (GST) regime. This inclusion could lead to more stable and regulated fuel pricing. Oil Minister Hardeep Singh Puri has indicated government intentions towards this goal; however, details are still under discussion.

Expansion of the PLI Scheme

Automakers are also advocating for an expanded Production Linked Incentive (PLI) scheme. This program provides financial incentives for manufacturing activities in India. The industry hopes to see this scheme cover more components, including tyres—a sector experiencing rapid advancements.

Akshit Bansal, CEO & Founder of Statiq, highlighted expectations around government policies aligning with net-zero targets and fostering sustainable growth: "With a firm commitment to combat pollution and climate change, there is strong anticipation for government policies aligning with net-zero targets and fostering sustainable growth.

Central to this agenda is the introduction of Production-Linked Incentive (PLI) schemes tailored for EV charging firms, crucial for expanding our charging infrastructure and accelerating nationwide EV adoption."

Arun Surendra - Managing Director of VST Group remarked on hybrid vehicles' potential: "As the automobile industry significantly contributes to our GDP, we need a more efficient duty structure and GST. Hybrid vehicles offer many consumers an accessible path to cleaner transportation. If the government reduces the tax burden on hybrids, it would make these vehicles more affordable and speed up their adoption, complementing the growth of the EV market."

The upcoming Union Budget holds significant potential for shaping India's automotive landscape by addressing these key areas.