Government’s Duty Exemptions on Critical Minerals and Capital Goods Poised to Boost Domestic EV Manufacturing and Market Expansion here is critical analysis of Budget 2025
The Union Budget 2025 has set the stage for a transformative leap in India’s electric vehicle (EV) sector, with bold policy moves aimed at strengthening domestic manufacturing and lowering costs. The removal of Basic Customs Duty (BCD) on critical minerals and capital goods used in EV battery production is expected to provide a much-needed boost to Indian manufacturers, making EVs more affordable and accelerating the shift towards sustainable mobility.
Key Benefits for the EV Industry
- Lower Battery Costs, Cheaper EVs
Batteries account for 35-40% of an EV’s cost. The removal of BCD on crucial materials like cobalt powder, lithium-ion battery waste, lead, and zinc will directly reduce input costs, potentially bringing down EV prices for consumers. - Stronger Domestic Manufacturing
Exempting duties on 35 additional capital goods required for EV battery production will enhance local manufacturing capabilities. This aligns with the government’s Make-in-India vision, reducing reliance on imports and fostering self-sufficiency in clean technology production. - Job Creation & Industry Growth
The push for domestic battery manufacturing will generate employment opportunities across the supply chain, from raw material processing to assembly lines, benefiting MSMEs and large-scale manufacturers alike. - National Manufacturing Mission – A Policy Backbone
The proposed National Manufacturing Mission will create a structured framework for growth, providing policy support, execution roadmaps, and monitoring mechanisms for clean tech industries, including EV batteries, motors, and controllers.
Market Growth & Future Prospects
India’s EV market, currently dominated by two-wheelers and three-wheelers, is expected to expand rapidly, with improved affordability and local production efficiency. Reduced production costs, better supply chain resilience, and government-backed initiatives could attract new investments, accelerating EV adoption across passenger and commercial vehicle segments.
Challenges & Possible Drawbacks
- Supply Chain Dependencies: While India aims for self-sufficiency, critical minerals still require international sourcing, making price fluctuations a potential concern.
- Implementation Hurdles: The success of these policies depends on effective execution, clear regulatory frameworks, and industry collaboration.
- Battery Recycling & Waste Management: With more EVs on the road, handling battery disposal and recycling efficiently will become crucial to prevent environmental risks.
- Infrastructure and Ecosystem Readiness,: Charging Infrastructure Gap: While production costs are being addressed, the overall growth of the EV sector also depends on complementary infrastructure such as widespread, reliable charging networks. Many analysts point out that without parallel investment in charging stations, cost reductions may not immediately translate into increased EV adoption.• Technology Maturity: Although advances in battery technology are ongoing, challenges such as range anxiety, battery life, and standardization remain. These technical issues might slow the pace of consumer acceptance if not addressed in tandem with manufacturing incentives.
- Market and Competitive Risks: Over-reliance on Incentives: There is a risk that the industry becomes too dependent on duty exemptions and fiscal support. If these measures are later scaled back or if global economic conditions change, manufacturers may face difficulties adjusting to higher input costs suddenly.• Global Competition: As other regions (like China and Europe) continue to invest heavily in EV technologies, Indian manufacturers will need to ensure that the domestic policies translate into genuine competitive advantages rather than temporary relief. Companies like Tata Motors are already racing to set up local battery gigafactories, but sustaining this momentum amid global competition remains a challenge.
Budget 2025 presents a landmark opportunity for India’s EV ecosystem. By fostering local manufacturing, reducing costs, and creating policy-driven growth, the government is paving the way for a cleaner, greener future. However, long-term success will hinge on strategic execution, industry adaptability, and sustainable supply chain management.
With these measures in place, India is poised to become a global hub for EV innovation and manufacturing, accelerating the nation’s journey towards carbon neutrality and energy independence.