Budget 2025 introduces a strategic framework that balances immediate incentives to drive domestic spending with the government’s continued focus on Make in India and technological advancements. A key emphasis is on Clean Tech Manufacturing, aimed at boosting domestic production of critical components such as EV batteries, motors, controllers, and electrolysers—aligning with India’s net-zero objectives.
A significant highlight is the revised income tax threshold, allowing individuals to earn up to INR 12 lakh tax-free, while salaried employees benefit from relief up to INR 12.75 lakh. This move is expected to stimulate consumer demand in the automotive sector, particularly among entry-level two-wheeler and four-wheeler buyers.
The budget introduces refinements in customs duties on various automotive imports, aiming to optimize manufacturing costs. Notably, 35 capital goods used in the production of lithium-ion batteries for EVs have been added to the fully exempted list, a move expected to strengthen India’s battery manufacturing ecosystem. This benefits companies under both the ACC PLI and automotive PLI schemes, which mandate significant domestic value addition. However, some industry players had anticipated similar tariff adjustments for alternative battery chemistries, such as sodium-ion or multi-ion, to reduce India’s reliance on imports.
The budget also revises duties for motorcycles: tariffs on completely knocked down (CKD) and semi-knocked down (SKD) kits for ICE models have been reduced by 5%, potentially encouraging local assembly. Premium motorcycle manufacturers may find the updated rates on completely built-up (CBU) units appealing, with bikes above 1600cc taxed at 30% and those at or below 1600cc at 40%, both plus applicable surcharges. Meanwhile, electric motorcycle duty rates remain unchanged.
The removal of social welfare surcharges, coupled with the introduction of AIDC, keeps effective rates largely unchanged for many four-wheeled and luxury vehicles. However, there is a slight 2.5% reduction in basic customs duty on car seats.
Expanding zero-duty imports for additional EV battery manufacturing capital goods could further lower the production costs of advanced battery packs, motors, and chargers, enabling local manufacturers to scale operations more rapidly. By promoting domestic manufacturing while easing select import constraints, the budget supports the wider adoption of electric vehicles and advances India’s transition to cleaner, low-emission transport.
While some industry expectations—such as GST rationalization, an extension of PM E-drive, and a second phase of the PLI program—remain unaddressed, the introduced measures are expected to stimulate near-term demand, accelerate the adoption of new technologies like EVs, and foster broader growth benefiting MSMEs, exporters, and education at the grassroots level.
