Key announcements made during Budget 2022 to boost the Indian auto and EV industry

From battery swapping policy to development of highway projects, here's what FM Nirmala Sitharaman announced to boost the Indian auto industry.

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The Finance Minister of India Nirmala Sitharaman today presented the much anticipated Budget 2022 in the Parliament, putting focus on the spending done to elevate the  infrastructure and development in the country. On the other hand, Finance Minister also announced to further increase electric vehicle penetration in India by giving sops and announcing new policies. We create a list of automotive related announcements made in the Budget 2022.

Commercial Vehicles

In line with expectations, the automobile sector, especially commercial vehicles (CV) would continue to reap the benefits of the Government’s continued thrust on infrastructure development and capital expenditure across sectors. The Government’s Gati Shakti Programme, encompassing thrust on seven different engines of growth including roads, railways, and multi-modal logistics infrastructure augurs well for the demand for CVs, especially Tipper Trucks.

The Government’s effort to mobilize funds through multiple avenues, especially Sovereign Green Bonds besides addressing the inherent bottlenecks to ensure faster execution of infrastructure projects by construction companies will be critical for uplifting the sentiments of the construction equipment segment, including tipper trucks.

The medium and heavy commercial vehicle (M&HCV) truck segment, which has witnessed sharp demand contraction over the past two years, will get support from the increased allocation towards the infrastructure sector. Further, the Government’s focus on climate change and clean mobility through plans to introduce battery swapping policy and standardization of charging infrastructure norms also augur well towards enhancing the penetration of electric buses in key cities.

Electric Vehicles

The government focus on promoting electric vehicles, as a means of transportation in the country, was reiterated in the budget. In addition to existing financial incentives under the FAME-II scheme to boost demand and the PLI Schemes for ACC and auto segment focused on EVs and other alternative energy technologies, the Finance minister in the budget announced plans to implement a battery swapping policy and formalize interoperability standards.

If implemented efficiently, the same is likely to go a long way in reducing range anxiety with regards to EV adoption while also aiding economies of scale in battery production. The Finance minister also announced plans to further the push for EV penetration in public transport and create special mobility zones for EVs, which should also spur EV demand.  In addition, the inclusion of energy storage in the harmonised List of Infrastructure will facilitate cheaper financing availability to EV battery makers.

Automotive

The Government’s continued focus on rural development and farmer welfare in the budget augurs well to uplift rural sentiments, and thereby remains positive for the tractor and two-wheeler segment. The allocation of Rs. 20,000 crore for road infrastructure projects, is likely to lead to a spillover demand for commercial vehicles and would be a positive for the segment. 

The plans to implement a battery swapping policy and formalize interoperability standards, if implemented efficiently, are likely to go a long way in reducing range anxiety with regards to EV adoption while also aiding economies of scale in battery production. The Finance minister also announced plans to further the push for EV penetration in public transport and create special mobility zones for EVs, which should also spur EV demand.

The above views are of Shamsher Dewan, Vice President & Group Head - Corporate Ratings, ICRA Limited. All views are personal.