Budget 2025: Auto Industry expects GST reforms, enhanced localization, EV adoption

As India prepares for the Union Budget 2025, the automotive industry anticipates crucial policy measures that could shape its future trajectory. This sector is looking for innovative reforms that would aid the moving toward the electric vehicle (EV) pivot and also bolster the supply chain, local manufacturing, and enhance local manufacturing, and improve overall infrastructure. The stakeholders of the business expect this to be along with a balanced approach that encompasses taxation, skill development, and technology adoption so that the competitive edge of the Indian auto industry in the global lens is maintained while meeting the aspirations of the country’s green goals. Here’s an overview of what the automotive industry anticipates from the upcoming budget.

Union Budget 2025: What Auto Inc. Expects

Santosh Iyer, Managing Director & CEO, Mercedes-Benz India"We hope for forward looking measures from the budget that fosters sustainable economic growth and enhances India’s global competitiveness. Continued push for BEV adoption by pursuing the existing incentives, infrastructure development and R&D initiatives will be crucial in accelerating India’s transition to green , said, mobility, positioning us as a key player in the global BEV value chain. Reducing trade barriers and simplifying regulatory frameworks can further integrate India into global supply chain, while any additional measures that lower the cost of doing business, can result in attracting new investments and boost advent of new technologies and innovation. By prioritizing these areas, the government can create a resilient, future-ready economy, bolstering India’s firm standing on the global stage."

Mr Piyush Arora, MD & CEO of Skoda Auto Volkswagen India, says, "The upcoming Union Budget presents an opportunity to address some pressing needs of the automotive sector. A long-term vision for favorable tax structure catering to different automotive technologies would certainly benefit the industry. The product development cycles are quite lengthy and require substantial investment which needs to be considered. Simplifying the GST structure for the different classes of vehicles & components is another ask.

The Government‘s PLI scheme facilitates in boosting investments in domestic manufacturing. Budget allocation on facilitating the EV ecosystem like charging infrastructure will give further lift to sustainable mobility. Allocating a budget for better and safe road infrastructure will facilitate the growth of the auto industry. There are early signs of auto industry growth slowing down. Therefore, budgetary initiatives to boost disposable income of consumers is necessary to support robust growth. I am optimistic that this Budget will introduce practical and forward-looking measures to strengthen the automotive sector and support its role in India’s economic growth and environmental ambitions."

Pulkit Khurana, Co-Founder Battery Smart, said "In 2024 EV sales in India crossed 14.08 lakh units achieving a market penetration rate of 5.59%, up from 4.44% in the previous year. As we look ahead to the upcoming budget, it’s important to address the GST disparity that’s limiting the full potential of EV adoption. Currently, EVs with lithium-ion batteries attract a GST of 5%, while standalone batteries face a much higher rate of 18%. This disparity places a significant financial burden on commercial EV drivers, particularly electric three wheelers, and gig workers, who are at the heart of India’s EV ecosystem. 

We hope policymakers will take steps to align the GST on standalone batteries with that of EVs at 5%. This adjustment would not only reduce costs for commercial drivers but also make EVs more accessible and financially viable, ensuring the benefits of clean mobility reach the grassroots and drive widespread adoption.”

Avinash Sharma, Co-Founder and CEO, of ElectricPe, said “EV sales in India crossed 1.9 million units in 2024, reflecting a substantial 27% year-on-year growth. Progressive policies and increasing consumer confidence in electric mobility have driven this momentum. As we look ahead, ensuring continued growth and accessibility will require a focus on aligning key elements within the ecosystem. 

One important consideration is the variation in GST rates across EV components. Currently, manufacturers procure electrical components at 12% and 18% GST and mechanical parts at 28%, while the final vehicle is taxed at 5% to encourage adoption. A more consistent GST structure across components could help streamline operations, improve working capital efficiency, and accelerate the expansion of EV infrastructure, ultimately supporting India’s long-term vision for clean mobility.”

Mr. Warren Harris, CEO & MD, Tata Technologies said, “As we approach the Union Budget 2025, the technology and engineering sector is looking forward to measures that can propel India into its next phase of economic and industrial growth. To achieve the ambitious goals outlined in India’s roadmap for a $5 trillion economy, the budget should prioritize innovation-driven policies, investments in emerging technologies, and the development of products in India—for India and the world. 

Key growth drivers such as smart manufacturing, AI, digital transformation, and software-defined vehicles (SDVs) require strong government backing through incentives for R&D, skill development, and infrastructure enhancement. We recommend increased allocation toward upskilling initiatives aligned with Industry 4.0, creating a future-ready workforce capable of excelling in advanced technologies like AI, IoT, and cybersecurity. India’s focus on sustainability and green mobility can benefit from policies encouraging the adoption and manufacturing of electric vehicles (EVs) and clean energy solutions. Streamlined GST norms and enhanced PLI schemes for EV components, high-tech manufacturing, and software services would catalyze growth. The budget can also emphasize fostering global competitiveness by introducing fiscal incentives for exports of engineering and technology solutions, strengthening India’s role as an innovation hub. Moreover, programs like Make-in-India and Engineer-in-India can attract significant foreign investment and foster self-reliance.

At Tata Technologies, we believe that a collaborative effort between industry and government is pivotal for achieving self-reliance, sustainable growth, and technological excellence. We are optimistic about the Union Budget 2025 and its potential to empower industries with the tools to lead the global technology landscape.”