Union Budget 2025 delivers a shot in the arm for the electric vehicle sector
The government has exempted 35 additional capital goods from customs duty for EV battery manufacturing, which can potentially reduce the cost of EVs.
The Union Budget 2025 extended support to the adoption of electric vehicles in the country by boosting domestic manufacturing of lithium-ion batteries.
Finance Minister Nirmala Sitharaman, in her speech, proposed to exempt 35 additional capital goods from basic customs duty (BCD) for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing. This is expected to boost domestic manufacturing of lithium-ion batteries.
Lithium-ion batteries are the most important component of an electric vehicle, and contribute significantly to the cost of an EV. India relies heavily on imports of Li-ion cells as they require mining critical minerals, and India has limited reserves of such rare earth elements.
The move to exempt BCD on capital goods required for EV battery manufacturing makes it cheaper to assemble these batteries in India, reducing reliance on imports.
“A significant boost to the EV battery industry; the National Manufacturing Mission's coverage of MSME represents a step forward in bolstering domestic EV battery production. The FM's plan to exclude Lithium-ion batteries from basic customs duty will even increase the cost-effectiveness and flexibility of the supply chain. More EV adoption will also be supported by stronger energy infrastructure, particularly for EV charging stations, which will be fuelled by power sector reforms and state incentives,” said Pratik Kamdar, CEO and Co-founder of Neuron Energy, a Li-ion battery manufacturer.
The focus on domestic battery manufacturing will also eventually have a positive impact on the price of electric vehicles. Batteries represent a substantial portion of an EV’s cost, accounting for about 30%.
“The Union Budget 2025-26 has taken a commendable step towards strengthening India’s manufacturing ecosystem by removing the BCD on critical materials such as cobalt, Lithium-ion battery scrap, and lead. These materials are essential for the production of lithium batteries, which are the backbone of the electric vehicle and clean energy industries. By eliminating these duties, the government is not only reducing the cost of production for manufacturers but also accelerating the transition towards more affordable and sustainable technologies,” said Uday Narang, Founder and Chairman of Omega Seiki, an EV three-wheeler manufacturer.
Rohan Dewan, Founder and CEO of LeafyBus, an electric bus fleet operator, echoed that cheaper batteries will accelerate the adoption of EVs. “The proposed measures to make electric vehicles more affordable are set to accelerate the adoption of clean mobility solutions,” he said.
Additionally, the finance minister has fully exempted BCD on scrap of lithium-ion batteries, lead, zinc, cobalt powder and waste, securing their availability for manufacturing in India.
“We applaud the Union Budget 2025 for its transformative policies to reduce import dependency and foster Aatmanirbhar Bharat through the domestic recycling of lithium-ion battery scrap. By enabling the import and low-cost processing of lithium-ion battery scrap, the government has paved the way for India to become self-reliant in critical materials production. This move will not only bolster the EV and renewable energy sectors but also position India as a global leader in the circular economy,” said Utkarsh Singh, Co-Founder and CEO of BatX Energies, a lithium-ion battery recycling company.
The Budget also disclosed that the government has allotted Rs 4,000 crore to the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme for FY25-26.
The scheme, which was introduced in September last year, promotes electric vehicles in the commercial transport sector by incentivising electric buses, ambulances, and trucks along, with electric two-wheelers.
PM E-DRIVE scheme had allotted Rs 1,871 crore in FY 24-25, according to the revised estimates mentioned in the Budget document.
The government has also allocated Rs 1,310 crore towards the PM eBus Sewa Scheme. Launched in 2023, the scheme aims to support the deployment of 10,000 electric buses across the country.
“This Budget provides a strong fiscal framework for sustainable mobility. The focus must now shift to coordinated execution between policymakers and industry stakeholders to drive meaningful impact on the ground,” said Anirudh Arun, Co-founder and CEO, BluSmart Fleet.
(The copy was updated with a quote.)
Edited by Kanishk Singh