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Automobile sector received a huge disruption due to the pandemic. It faced decline in the demand and the impact was felt throughout the whole value chain of this sector. Following the COVID-19 epidemic, the car industry has been dealing with increased material prices, semiconductor shortages, and low sales volumes, necessitating adjustments to ensure a strong recovery. Government has tried supporting this sector through various policies but not much changed in terms of sales in the last two years.

As major economies are moving towards electric vehicles, it was time for government to bring some clear reforms for India’s transformation moving towards EV.

Budget 2022 policies

New Battery Swapping Policy

The government will soon implement a new battery swapping policy that would benefit the entire EV industry. The action will allow key EV players, OEMs, and charging infrastructure businesses to set up battery-swapping stations and technologies in the country, enabling for a shift from ICE-powered vehicles to electric vehicles.

Electric Vehicles for Public Transport

In the commercial vehicle sector, the finance minister announced the introduction of clean and electric vehicles. The action will assist automakers in developing and manufacturing electric buses and commercial vehicles for public transportation, lowering the burden on fossil-fuel-powered vehicles. Furthermore, public transportation using battery-powered vehicles would benefit from decreased operating costs as well as reduced pollutants.

Opening R&D defence to private auto component makers

Private automakers can now submit bids to supply auto components to our defence arsenal. This change could open up new income and growth opportunities for auto component manufacturers. Carmakers such as Tata Motors and Mahindra, on the other hand, have successfully delivered products to the armed forces to date.

MSP payments to increase vehicle demand

Budget 2022 also included a 2.73 lakh crore Minimum Support Price (MSP) payment, as well as other perks to help the farming sector, which could increase demand for automobiles in rural India. Rural areas are expected to respond positively to the announcement, since they account for a large portion of vehicle manufacturers’ sales in the two-wheeler and entry-level car segments.

Overall, the budget might not have brought major relief to the automobile sector, but it is all in favour of encouraging the EV transition and moving towards green mobility.


Shilpa Jain

Editor, TJEF