Union Budget 2025-26: Introduction
The Union Budget 2025-26 has reduced prices on strategic components that can reshape the automotive landscape in India. Not to mention, the new income tax slabs also allow middle-class car buyers to have disposable income that can be used to buy cars.
Income Tax Rebates Upto Rs. 12.75 Lakhs
The Union Budget, presented by Finance Minister Nirmala Sitharaman, has introduced an exemption of up to Rs. 12.75 lakhs. The taxpayers will be able to use this component in the form of a rebate at the time of filing returns for the financial year. This exemption leaves the middle class with disposable income which can assist them in buying new 2-wheelers, 3-wheelers and 4-wheelers.
Waived Custom Duties On Capital Goods
Under the scheme, maximum attention is given to boosting the EV market. There are waived custom duties on 35 capital goods which are necessary for the production of batteries used in production vehicles. This means that the production cost for EVs can potentially be reduced and reach a wider audience.
Production Linked Incentive Scheme
There is also the introduction of the Production Linked Incentive Scheme that aims to give businesses an added incentive to boost sales. With respect to the automotive sector, the focus lies on building and producing hydrogen fuel cells and electric batteries. It can be expected that with the reduction in production cost of the respective components, businesses will be able to hire more staff and workers, resulting in an efficient supply chain.
In 2025, the government has allocated Rs. 2819 crores for the growth of the sector. However, this is lower than the budget Rs. 3500 crores allotted in the previous financial year. This still means a help for the industry in terms of growth and further advancements.
Dhan-Dhaanya Krishi Yojana
The introduction of Dhan-Dhaanya Krishi Yojana and increased Kisan Credit Card Limits can see a direct growth in sales for commuter bikes, tractors, and “people movers” in rural areas.
MSMEs (Micro, Small and Medium Enterprises) are one of the most crucial players in the supply chain of the automotive market. They have received special attention under the union budget for 2025-26. This includes enhancements to credit guarantee schemes which eases financial access for component manufacturers and dealerships to upscale!
Reduced Import Duties On Bikes
There will also be a reduction of import duties under the new Budget on bikes like Harley Davidson. These imported bikes come from the USA and this decision was taken as a result of the Trump Administration threatening to reciprocate taxes on countries that levy heavy taxes on US Goods. The Union Budget 2025-26 has reduced the import duty on motorcycles with engine capacity of 1600cc, imported as CBU (Completely Built Units), from 50% to 40%.
Harley Davidson bikes are known for producing such high-capacity bikes. In addition to this, the import duty on SKD (Semi Knocked Down) units has also been reduced from 25% to 20%. The duty on CKD (Completely Knocked Down) has been reduced from 15% to 10%.
Outlook
Overall, the Union Budget 2025-26 aims to focus on tax relief, EV Growth, locally manufactured goods and supporting MSMEs. This lays down a strong foundation for growth in the automotive sector. However, the final verdict of the growth will be analysed over a period of time.
