A major boost? How electric vehicle prices could feel the impact of 'Amrit Kaal' Budget

Finance Minister Nirmala Sitharaman, during her Union Budget 2023 presentation in the parliament, laid out ambitious goals of the Centre in the automobile sector. Sitharaman announced a reduction in basic customs duty to reduce input costs, deepen value addition, promote export competitiveness, and correct the inverted duty structure so as to boost domestic manufacturing. Among a gamut of products that will be imposed with less custom duty are specialised capital goods and machinery for manufacturing lithium-ion batteries for use in batteries of electric vehicles (EVs). 

However, the rate of duties in automobiles, including EVs in Semi-Knocked Down (SKD) form has been raised from 30% to 35%. Moreover, luxury cars (both petrol-diesel and electric cars) will be expensive as the custom duty has been raised from 60% to 70%.

Basic customs duty rates on goods, other than textiles and agriculture, reduced from 21 to 13

Custom duty exempted on import of capital goods and machinery for the manufacture of lithium-ion cells for batteries used in electric vehicleshttps://t.co/uLDJFled67#AmritKaalBudget pic.twitter.com/yAUS7FszEC

— PIB India (@PIB_India)

This move could cause a reduction in the cost of EVs and is likely to increase their demand in the market. Moreover, the Finance Minister also announced allocating more funds towards the vehicle scrapping policy to replace vehicles older than 15 years. "Replacing old polluting vehicles is an important part of greening our economy. In furtherance of the vehicle scrapping policy mentioned in Budget 2021-22, I have allocated adequate funds to scrap old vehicles of the central government. States will also be supported in replacing old vehicles and ambulances", Sitharaman said. 

All this, Sitharaman said, is to provide impetus to green mobility. The Centre has also set a target to reach an annual production of 5 MMT by 2030 under the National Green Hydrogen Mission. With an outlay of Rs 19,700 crore, this mission aims to facilitate a transition to low carbon intensity and reduce dependence on fossil fuel imports.

What's different from 2022?

In 2022, the Battery Swapping Policy was one of the key announcements in the budget. This policy was introduced to encourage the transition towards the electrification of vehicles and invite private companies to develop technologies required for the same and set up battery-swapping stations. 

While the Centre did not provide relief on the buying cost of cars, bikes and scooters, Rs 20,000 crore was set aside for the infrastructure projects meant to boost the scale of manufacturing and eventually increase demand for commercial vehicles. It was also aimed at increasing the demand for vehicles in rural India, where two-wheelers and low-cost cars capture the largest share of the market.

Earlier in January, reports revealed that India overtook Japan to become the third-largest vehicle market in 2022 after China and the US. According to the Society of Indian Automotive Manufacturers (SIAM), India sold 4.13 million vehicles (both passenger and commercial) between January and November 2022.