The Union Budget 2023-24 presented by the Finance Minister Nirmala Sitharaman has set the wheels in motion for the growth of the automobile industry in India. With a keen focus on domestic manufacturing and enhancing value addition, the budget aims to give the Indian automotive industry a much-needed boost.
Encouraging the Adoption of Electric Vehicles (EVs)
In a bid to promote cleaner transport options, the government has made some crucial announcements that will bring about a change in the way people perceive EVs. The capital goods and machinery required for the manufacture of lithium-ion batteries for EVs will now be exempt from customs duty. The custom duty on lithium-ion batteries, excluding textiles and agriculture, has been reduced from 21% to 13%. The subsidies on EV batteries have been extended for another year, bringing down the cost of locally-manufactured EVs. This will give a push to EV manufacturers to increase their product line-up and spur the adoption of EVs in India.
Imported Vehicles to Attract Higher Customs Duty
The Union Budget 2023-24 has brought about some changes in the customs duty of vehicles, especially imported ones, in the form of Semi-Knocked Down (SKD) and Completely Built Units (CBUs). The custom duty on vehicles in SKD form has gone up from 30% to 35%, while the 3% social welfare surcharge has been removed.
For CBUs of internal combustion engine (ICE) vehicles, the customs duty has been increased from 60% to 70%, except for those with a cost, insurance, and freight value over USD 40,000 or with an engine capacity over 3,000 cc for petrol models and 2,500 cc for diesel models or with both. The custom duty for EVs in CBU form, excluding those with a CIF value over USD 40,000, has been increased from 60% to 70%. The social welfare surcharge on CBU vehicles has been reduced to zero from 6%.
Domestic Manufacturing and its Impact on Demand
The increase in customs duty on imported vehicles, especially SKDs and CBUs, will have an impact on the demand for luxury and ultra-luxury vehicles. However, this move is expected to push original equipment manufacturers (OEMs) to produce such cars domestically in India. Some of the prominent OEMs in the country, including Maruti Suzuki India, Hyundai Motor India, Mahindra & Mahindra, Mercedes-Benz India, Hero MotoCorp, TVS Motor Company, and Ashok Leyland, have praised the Union Budget 2023-24 as being growth-oriented and progressive.
The Union Budget 2023-24 is poised to give the Indian automotive industry a much-needed push, leading to growth in the industry and the overall economy. With reduced prices of EVs and higher customs duty on imported vehicles, the domestic automobile industry is expected to benefit, leading to a brighter future for the Indian automotive industry.
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