Budget 2025 — Impact On EV Ecosystem

The four major areas of focus are tax relaxations for capital goods, expansion of manufacturing capacity, enhancement of credit opportunities (especially for smaller players) and allocation of funds for existing electric mobility schemes. These are further explained below.

Exemption of basic customs duty on critical elements, such as cobalt powder and lithium-ion battery scrap and on certain additional capital goods necessary for EV battery manufacturing, along with the extension of time limit for imports' end-use from six months to one year will reduce costs and scale up EV manufacture.

The prescription of a time limit of two years extendable further by one year to finalise provisional customs assessment and proposal to enable importers/exporters to voluntarily declare material facts and pay duty with interest (but without penalty) after clearance of goods can improve trade facilitation and ease of doing business.

The National Critical Minerals Mission with a budgetary outlay of Rs 400 crore will create a competitive approval process and offer financial incentives for critical mineral exploration including lithium.

Further, the introduction of the National Manufacturing Mission for the MSME sector to focus on creating a future ready workforce will specifically boost the OEM sector — the manufacturing of EV components and batteries.

In the backdrop of the government's focus on clean projects, the allocation of Rs 1.5 lakh crore towards 50-year interest-free capital expenditure loans for states (for which states need to propose three-year PPP projects) and the promised launch of investment friendliness index for states this year will encourage the states to revamp their EV policies and provide competitive incentives.

Further, while the PLI schemes for automobile and auto components and for advanced chemistry cells have received budgetary support this time as well, the high eligibility thresholds under the PLI schemes have been a longstanding concern for the entry of several mid-sized manufacturers into the EV sector. With the government's proposal to double the thresholds for classification and the enhancement of credit guarantee limit for MSMEs, the gamut of enterprises that can now avail MSME benefits will expand. This move can drive smaller players into the niche EV opportunities, including setting up of charging or battery swapping stations.

The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive) Scheme notified in September 2024 superseding the FAME policies, has received a significant allocation of Rs 4,000 crore. The scheme provides demand incentives to e-buses, e-3w, e-2w and electric ambulances while also focusing on charging infrastructure and upgradation of testing agencies.

The budget targets to establish a network of 500 charging stations under PM E-Drive. Further, the allocation of Rs 1,310 crore to PM e-Bus Sewa Payment Security Mechanism focusing on ensuring transition to public e-buses reinforces the government's aim to drive large-scale EV adoption.