Auto Industry’s Reaction to Budget 2025: Mixed Responses on Key Proposals

The Indian automobile industry has responded with a mix of optimism and concern following the presentation of Budget 2025, with key measures aimed at encouraging innovation and sustainability in the sector. However, some industry leaders are questioning the sufficiency of the proposals to drive immediate growth amid ongoing challenges.

Focus on Green Mobility and Electrification

Industry stakeholders reckon that one of the major highlights of Budget 2025 was the increased emphasis on Electric Vehicles (EVs) and green technologies. The move aligns with India’s broader goal of reducing carbon emissions and fostering a sustainable automotive ecosystem.

Shailesh Chandra, President,  Society of Indian Automobile Manufacturers (SIAM), is of the view that the government's specific focus on rural prosperity and agriculture, coupled with reforms in the Personal Income Tax, is likely to have a positive effect on the Auto Industry, and will help in creating demand. 

According to him, "As the Auto Industry transits into cleaner powertrains, in line with the PM’s vision on sustainable mobility, it will specifically benefit from the National Manufacturing Mission, which supports clean tech manufacturing for batteries, motors and controllers. Furthermore, the exemption of critical minerals (e.g. Cobalt, Lead, Zinc etc.), scraps of Lithium-ion battery, and 35 additional capital goods from customs duty, will help create a strong EV ecosystem in the country. "

Incentives and Infrastructure Development

In addition to the push for electric mobility, the government has proposed measures to improve the overall infrastructure supporting the automotive sector. The creation of a dedicated fund for R&D in AI-based manufacturing processes and smart transportation systems has also generated positive feedback from industry leaders.

Despite the emphasis on innovation, a few industry stakeholders expressed concerns over rising operational costs and the ongoing supply chain disruptions. The auto industry has been grappling with rising raw material costs, especially for critical components like semiconductors.

While the budget allocated some relief in the form of subsidies for Small and Medium enterprises (SMEs) in the auto sector, many argue that more comprehensive measures are needed.

Taxation and Consumer Incentives

On the taxation front, the government’s decision to keep excise duties on conventional vehicles unchanged has been met with mixed reviews. While some argue that the lack of tax cuts on traditional vehicles puts a strain on their competitiveness against newer and greener options, others appreciate the stability in the tax regime.

Looking Ahead: A Balancing Act

Overall, while Budget 2025 shows promise in fostering the growth of green technologies and bolstering innovation, stakeholders across the auto industry are calling for more detailed support to tackle cost-related issues and ease production challenges.