Union Budget 2022: What's In It For The Auto Industry?
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Union Budget 2022: What’s In It For The Auto Industry?

The Union Budget speech has made quite a few ripples ever since Finance Minister Nirmala Sitharaman announced the Union Budget for 2022 on early Tuesday morning. In her speech, she presented a lot of measures that will help boost the Indian automotive industry: including steps like announcing a new battery swap policy to encourage electric vehicle adoption, opening up defence R&D to private players for auto component development. Looking back at the past couple of years (and recovery from the pandemic shock), these new additions smell like they would bring a lot of hope and rejuvenation to the auto industry.

We bring you a compilation of key highlights from the Union Budget 2022 that pertain to the Indian auto industry and shall be responsible for making it grow.

Battery swapping policy

The announcement that garnered the most eyeballs is that of the Battery Swapping Policy. It is one of the key announcements and is believed to be able to benefit the EV system in India if implemented efficiently.

With this policy, the government will encourage private entities to help take up and establish battery-swapping stations and technology. The vehicle manufacturers and EV charging infra players too will get benefit from this policy that could boost EV adoption in India. The policy is expected to drive movement to the electrification of fleets for last-mile mobility for both people and goods.

The impact of this policy will be limited to certain players in the sector and unlikely to bring any big change in the Indian electric mobility space at a quick pace.

EVs in public transport

The Union Budget 2022 also focused on integrating the ever-growing electric vehicles into public transport as well. In the past, India has surely become an up-and-coming hub for private EV vehicles, but Finance Minister Nirmala Sitharaman said that government would encourage cleantech and electric vehicles into the public transport space.

This will also, in turn be able to help auto companies that manufacture commercial vehicles and electric buses, as well as their respective supply chain partners. However, this does pertain to only a chunk of the automotive sector and will certainly benefit only a select few.

Cars, bikes, scooters won’t get cheaper

While the Finance Minister made several announcements for the betterment of the auto industry, there was a focus on the expected announcements that didn’t make the cut. There were certainly a few expectations, and it seems like most of them haven’t been met.

Key demands like incentives for new electric vehicle adoption, tax cut, and revised duty structure have been left almost unchanged. Also, no major announcement was made to help the auto industry overcome the rising input costs.

This may mean that there will be no change for the better in the price of cars, bikes and scooters., they wouldn’t get cheaper. This could also mean an unprecedented increase in the costs of vehicles since manufacturers will have increased pressure to deliver.

Opening defence R&D to private players

The Finance Minister also announced that the government plans to open up defence R&D to private players. This opens up avenues for growth for the auto component companies in India. Chief car manufacturers like Tata Motors and Mahindra have already been invested in this segment, working in the defence sector and making vehicles catered to the armed forces. This new announcement will help certain players increase their growth prospects.

₹2.73 lakh crore MSP payment to boost rural vehicle demand

The government has also announced an MSP payment of ₹2.73 lakh crore along with other benefits to aid the farming sector, which could eventually help demand for automobiles in rural markets to grow. The Covid-19 pandemic hit a lot of major sectors, and it hit the rural economic sentiment pretty badly, especially the second wave. It dampened any prospects for growth, but this strategy might help revive it.

It is believed to be able to help with improving the rural sentiment and boost demand for vehicles in rural markets. This includes a lot of two-wheelers, cars and SUVs as well as commercial vehicles and tractors.

20k crore to boost infrastructure projects

The Finance Minister also announced the allocation of ₹20,000 crores for infrastructure projects. This will eventually boost demand for commercial vehicles as new projects at a large create demand for new CVs. The announcement comes at a time when the CV sector has been hit hard by the pandemic and has just started showing signs of revival.

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