Union budget 2022; How it affects the Indian automotive industry

In a bid to enhance the opportunities and strategies planned for the Indian automotive industry in the future, Finance Minister Nirmala Sitharaman has introduced a few measures in the Union Budget 2022. As expected, majority of the measures introduced are aimed at accelerate the pace of adoption and strengthen electric mobility in India. Here are some of the key indicators announced for the Indian automotive industry.

Battery Exchange Policy

The Indian government is already aggressive with its electric mobility plans, and the first step in that direction for 2022 is to introduce a new battery swap policy. In this policy, the government asks private economic operators to participate in the establishment of battery exchange stations and to work on technologies in this direction. This particular step has been brought to boost India’s EV ecosystem as it aims at wide adoption of batteries and quick replacement of batteries that are discharged while driving which will ultimately save a lot of charging time and ownership costs of electric vehicles.

Introduction of electric vehicles in public transport

Union budget 2022;  How it affects the Indian automotive industry

This decision has already been introduced for city buses in major cities like Mumbai, New Delhi and Bangalore. However, the Indian government is keen to work to introduce more electric vehicles into public transport, including the adoption of smaller electric vehicles. The government wants more companies to strive to manufacture cost-effective electric buses and smaller utility vehicles for public transport, which will also diversify the businesses of their supply chain partners.

No policy to make cars, bikes and scooters more affordable

Union budget 2022;  How it affects the Indian automotive industry

Due to the adoption of strict emission standards and more mandatory safety standards, cars, bicycles and scooters have become much more expensive over the past couple of years. But the Indian government has not introduced measures such as tax reduction and duty structure revisions to reduce their costs. Automakers are already facing the brunt of rising input costs, which will only make automobiles even more expensive.

Open to contributions from private defense R&D players

Union budget 2022;  How it affects the Indian automotive industry

The Minister of Finance also announced that he was open to working with new players in the research and development of defense vehicles for the armed forces. Local automakers like Tata, Ashok Leyland and Mahindra are already active partners to work in the defense sector. While the government’s decision to open up defense R&D to private players will increase opportunities for more component manufacturers and revenue, the number will be limited to certain players only.

Introduction of MSP payment of Rs 2.73 lakh crore

Union budget 2022;  How it affects the Indian automotive industry

The finance minister has announced an MSP payment of Rs 2.73 lakh crore to boost demand for vehicles in rural parts of the country. Due to the first and second waves of COVID-19, new rural buying sentiment for new vehicles had reached an all-time low. This new strategy was introduced to stimulate sentiment and demand for two-wheelers, affordable passenger vehicles, small utility vehicles and tractors in rural areas.

Award of Rs 20,000 crore for infrastructure projects

Union budget 2022;  How it affects the Indian automotive industry

The Ministry of Finance has agreed to pump out Rs 20,000 crore for existing and upcoming infrastructure projects across the country. This decision will not only increase the quality of roads and infrastructure, but also the demand for new commercial vehicles. The government plans to add 25,000 km to the national highway network in the 2022-23 financial year.

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