Budget 2023: Electric Vehicles Made In India Will Become Cheaper! Find Out How?


Rohit Kulkarni

Rohit Kulkarni

Feb 03, 2023


In her Budget 2023 speech, which she delivered to Parliament on Wednesday, Nirmala Sitharaman, the Union Finance Minister, announced several initiatives for the electric automotive sector. The minister unveiled a slew of initiatives, such as indirect tax proposals, the elimination of customs duties on capital goods imported for the manufacture of EV batteries, a focus on hydrogen fuel, etc.

Budget 2023: Electric Vehicles Made In India Will Become Cheaper! Find Out How?

Government’s focus on green mobility:

The elimination of customs duties on capital goods imported to produce lithium-ion batteries was one of the most important announcements and would eventually help lower the cost of electric vehicles in the nation. However, this will apply to the locally produced electric vehicles made in India. In her budget speech, Sitharaman claimed that the country’s electric vehicle industry and green mobility would benefit from indirect tax proposals. 

“Customs duty exemption extended to import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles,” she said. She also proposed continuing the concessional duty on lithium-ion battery cells for another year.

Sitharaman reiterated the government’s emphasis on environmentally friendly transportation while announcing that 19,700 crores would be allotted for the National Hydrogen Mission, with a goal of achieving a production capacity of five million metric tonnes by 2030. “India is moving forward to net-zero carbon emissions by 2070. An outlay of ₹19,700 crore for the Green Hydrogen Mission will facilitate transmission to low carbon intensity and reduce dependence on fossil fuels,” she said. This strategy would help boost hydrogen fuel-powered mobility in India, for which the auto industry stakeholders have been advocating lately.

Due to the proposed reduction of the basic customs duty rates on goods other than agriculture and textiles from 21% to 13%, automobile sales in India may also increase. The customs duties, cesses, and surcharges on automobiles would consequently see minor adjustments, according to the finance minister. In the Union Budget for 2023, the personal income tax rebate cap was also raised from 5 lakh to 7 lakh per year. With more disposable income available to salaried consumers, this move is likely to assist the Indian auto industry in recording higher sales. This will likely further increase consumer demand for personal vehicles. A major setback for the luxury car market is the government’s decision to increase customs duty from 60% to 70% in the budget. As a result, fully imported luxury cars and electric vehicles will now cost more.

Vehicle Scrappage Policy:

The finance minister gave special attention to the Vehicle Scrappage Policy when announcing the budget. She said that more money would be given by the federal government to scrap old cars. She added that the federal government would aid state governments in getting rid of old cars and ambulances. “In addition to Vehicle Scrappage Policy announced in Budget 2021-22, more funds have been allocated now to support efforts to scrap old vehicles under the central government. States will also be supported to help them scrap old vehicles and old ambulances,” Sitharaman said in her budget speech.

The Union Budget 2023 put a lot of emphasis on greener mobility, the Vehicle Scrappage Policy, and marginal tax restructuring, but it made no mention of the FAME 2 scheme extension, which the auto industry has long sought. As the policy has already been extended for a further two years, it will end in March 2024.

The budget also made it very clear that it wanted to support a long-term zero-carbon strategy in the auto industry. The government clearly wanted to promote more environmentally friendly transportation options. If properly implemented, the budget speech’s announcements could help the auto industry make the transition to cleaner mobility. Following these announcements, the industry’s energy mix would quickly change, with cleaner fuels like electric, CNG, ethanol, and hydrogen gaining market share.


Rohit Kulkarni
Rohit Kulkarni
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