Auto Sector Budget 2026: Big EV Push and Tax Reforms Expected

Union Budget 2026: A Pivotal Moment for India's Auto Industry

The Indian automotive sector is keenly awaiting the Union Budget 2026-27, anticipating key policy announcements that could shape its trajectory for years to come. As the industry navigates a global shift towards electric mobility and strives to enhance its manufacturing competitiveness, stakeholders are looking to the Finance Minister for a clear roadmap. The consensus among industry leaders points towards a budget focused on accelerating electric vehicle (EV) adoption, strengthening domestic manufacturing through fiscal support, and rationalizing the existing tax structure.

A Green Push for Electric Mobility

The centerpiece of the auto industry's expectations is a significant push for green mobility. The government is expected to introduce measures aimed at making EV ownership more accessible and convenient. A key proposal is the creation of a unified EV super app under the PM E-Drive scheme. This digital platform would integrate services like real-time booking of charging slots, payment processing, and charger availability status, aiming to resolve common pain points for EV users.

Further, the budget is anticipated to provide fresh incentives for setting up domestic battery gigafactories, a critical step in reducing reliance on imports and lowering EV costs. Support for charging infrastructure through viability gap funding and tax concessions is also a major expectation. Industry experts believe that a reinforced Production-Linked Incentive (PLI) scheme, potentially expanded to include battery recycling technology and EV charging equipment, will be crucial for building a self-reliant ecosystem.

Strengthening 'Make in India' with Policy Support

Sustained support for domestic manufacturing remains a core demand from local automakers. Industry leaders have emphasized the need for policies that strengthen the entire value chain. A key issue that requires attention is the inverted duty structure for EVs, where taxes on imported components are higher than on fully built units. Rationalizing this structure is seen as essential to making local manufacturing more competitive and encouraging deeper localisation.

Anurag Mehrotra, MD of JSW MG Motor India, highlighted the need to rationalize duties on EV components to support this goal. Similarly, Piyush Arora, MD and CEO of Skoda Auto Volkswagen India, stressed that sustained support for domestic production is a key priority. The budget is expected to address these concerns to bolster the 'Make in India' initiative and position the country as a global automotive manufacturing hub.

Tax Rationalisation and Duty Reforms

Taxation remains a critical area where the industry seeks clarity and reform. While past GST revisions have been welcomed, leaders like Audi India's Brand Director, Balbir Singh Dhillon, have called for further rationalisation of taxes and duties to stimulate growth, particularly in the luxury segment. A stable, long-term policy framework is considered vital for attracting investment and ensuring sustained momentum.

For global automakers, a rationalisation of the import duty structure, especially for electric vehicles, could act as a strong catalyst. Jyoti Malhotra, MD of Volvo Car India, suggested that well-calibrated incentives could encourage multinational manufacturers to invest more deeply in India's sustainable mobility ecosystem. Such reforms would not only attract foreign capital but also accelerate the adoption of clean automotive technologies.

The Crucial Role of Infrastructure Investment

Underpinning the growth of the auto sector is the development of robust infrastructure. The industry expects the Union Budget 2026 to continue its focus on expanding the country's road and highway network. Increased capital expenditure on transport infrastructure creates a multiplier effect, boosting demand for both passenger and commercial vehicles.

For the burgeoning EV segment, the development of a high-speed charging network is non-negotiable. A significant budgetary allocation for charging infrastructure is crucial to alleviate range anxiety and accelerate EV adoption across the country. This investment is seen as a foundational requirement for India to achieve its ambitious electric mobility targets.

Market Impact and Investor Outlook

The announcements in Union Budget 2026 will have a direct impact on market sentiment and investor confidence. A budget that aligns with the industry's expectations is likely to be a positive trigger for auto stocks. Companies with a strong focus on electric vehicles, such as Tata Motors and Mahindra & Mahindra, are expected to benefit from policies promoting green mobility. Auto ancillary companies involved in the EV supply chain, including battery and component manufacturers, also stand to gain significantly.

Policy stability, clear fiscal incentives, and a commitment to infrastructure development will be key signals for long-term investors. The budget's ability to balance fiscal prudence with growth-oriented policies will determine the sector's performance in the coming financial year.

Conclusion

The Indian auto industry stands at a critical juncture, and the Union Budget 2026-27 is poised to provide the policy direction needed for its next phase of growth. The key demands are unambiguous: a comprehensive strategy to accelerate EV adoption, robust support for domestic manufacturing, a rationalised tax structure, and sustained investment in infrastructure. A forward-looking budget that addresses these areas will not only boost the automotive sector but also contribute significantly to India's broader economic and environmental goals.