The Union Budget is set to impact a lot of sectors from agriculture to public works. And the government has come up with many significant changes that will impact the auto industry in 2022. But will it provide the much-needed boost to the industry? Read on to find out.
Sustainable development through electric vehicles (EV)
Thebudget 2022 is all for sustainable development. So, electric vehicles have received a boost this year thanks to EV focused policies. The government aims to increase EV demand in the public transport space through partnerships with auto manufacturing companies.
Moreover, to increase the adoption rates of EVs in cities, the government has considered a battery swapping policy. This policy will allow OEMs, charging infrastructure companies, etc., to set up more charging stations country-wide, making EVs more accessible and affordable through interoperability.
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Additional Read – Pre-budget expectations for the retail consumer
Push for blended fuels
To increase the production and usage of ethanol-blended fuels, the finance ministry has proposed increasing the excise duty on unblended fuels by Rs. 2. What’s more, it recently approved a proposal to achieve 20% ethanol-gasoline blending by 2025. Such moves will encourage manufacturers to produce flex-fuel engines that can run effectively on mixed fuels while reducing the total fuel import bills alongside.
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Expansion of highways
To boost the capacity of India’s road networks under the PM Gati Shakti Programme, the government has proposed the expansion of national highways by 25,000 km. Many experts suggest this road infrastructure project will impact the demand for construction equipment, heavy-duty trucks, and vehicle tyres.
Auto components and parts manufacturing
The government announced the opening of defence R&D to private players allowing them to make components and vehicles for the Indian armed forces.
Additionally, the budget also proposed increasing the import duty on certain components (including electronic engine parts, turbochargers, windshield wipers, etc.) to 15%. This, in turn, will encourage manufacturing these components locally.
Focus on increasing rural automobile demand
The demands for incentives for EV adoption, revised duty structure, tax cuts, and GST rationalisation were not met during this year’s budget, leading to no reduction in the car price in urban areas. The government has now focused on increasing auto adoption in rural areas this year indirectly through minimum support price (MSP) payments.
This move will boost the demand for two-wheelers, entry-level cars, and used cars, addressing the falling rural demand for vehicles.
Additional Read – What to Expect from the Used Car Loan Market in 2021?
Thanks to the above policies, the auto industry is sure to get the much-needed boost to thrive.
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