Union Budget 2026: Here’s what EV sector is hoping for!
The Union Budget 2026-27 is just one week away and the EV sector is expecting FM Sitharaman to introduce measures aimed at accelerating electric vehicle adoption in India. Deloitte India has highlighted that the government could focus on strengthening domestic manufacturing, supporting clean mobility, and encouraging investment across the EV value chain.Sheena Sareen, Partner at Deloitte India told ANI, said that the upcoming Budget may include recalibrated Production-Linked Incentives (PLI) for EVs and advanced automotive components, along with targeted tax breaks for research and development and capital goods production. “This will help companies that have so far been unable to avail incentives due to stringent eligibility conditions,” she noted, adding that R&D remains central to the EV ecosystem. According to Deloitte India’s analysis, these steps would reduce reliance on imported technologies, promote indigenisation, and cut crude oil imports, saving valuable foreign exchange. Sareen highlighted the importance of these interventions, saying they “could play a critical role in scaling up EV production, reducing dependence on imported technologies, and lowering India’s crude oil import bill, thereby saving foreign exchange.” Tax incentives for innovation are expected to drive localisation of batteries, power electronics, and other critical EV components. The industry is seeking relaxation in domestic value addition norms and lower PLI investment thresholds to allow more manufacturers, including startups and component suppliers, to benefit. Sareen also mentioned a proposed capital goods incentive scheme, which would set thresholds for the automotive and EV sectors. “This would encourage domestic manufacturing of capital goods required for the EV and automotive sectors, which currently remain heavily dependent on imports,” she explained. Strengthening this segment could support the entire EV value chain and reduce long-term import dependence. On indirect taxes, Sareen said scope for further GST rate rationalisation is limited, following the GST 2.0 reforms. “The GST 2.0 exercise lowered rates for smaller vehicles to around 18% and pegged mid and higher segments at close to 40%. Expecting further broad-based cuts may be a stretch.” However, she noted that inverted duty structures continue to raise vehicle and EV costs. Extending refunds to capital goods and input services, or linking them to exports, could improve affordability. “These costs ultimately get embedded in vehicle pricing. Any relief here would directly improve EV affordability and adoption,” she said. Sareen also highlighted the need for simpler customs procedures, particularly regarding the Special Valuation Branch (SVB) for imports from related parties. Simplifying SVB norms and removing provisional duty requirements could boost supply chain efficiency and provide certainty on import costs. On sustainability, she noted that India’s shift to cleaner mobility is being driven by Corporate Average Fuel Efficiency (CAFE) norms rather than immediate carbon taxes. “As these measures evolve, they are likely to further incentivise electrification, hybridisation and other low-emission technologies,” she said, pointing to significant industry investments in energy-efficient technologies and EV platforms. She concluded that a well-designed mix of EV incentives, tax relief, and regulatory clarity in the upcoming Budget would not only support India’s clean energy ambitions but also reduce fossil fuel dependence and strengthen the country’s external balances over time.
