Budget 2026: What To Expect For Auto Industry?

The Union Minister of Finance, Nirmala Sitharaman, will present the Union Budget 2026 tomorrow. Traditionally the annual budget has had a lot to offer for the Indian automotive industry. However, in the last couple of years, the Union Budget has shied away from announcing anything significant specific to the auto industry.

Yet, OEMs across the industry continue to pin their hopes every year on the Union Budget since flourishing in the Indian auto market has become a tremendous challenge for many OEMs. While a large section of the auto industry benefitted from the recent revision in GST rates and the abolition of cess effective 22 September 2025, experts say further government support is needed to prepare for an increasingly uncertain future amid the current geopolitical landscape.

Retail sales data released by the Federation of Automobile Dealers Associations (FADA) indicates steady growth across all vehicle segments CY2025. Two-wheeler retail volumes increased 7.24% year-on-year (YoY) to 2,02,95,650 units, while passenger vehicle (PV) sales recorded a 9.70% YoY rise to 44,75,309 units. Commercial vehicle (CV) retails grew 6.71% y-o-y to 10,09,654 units, and three-wheeler sales expanded 7.21% YoY to 13,09,953 units.

Besides calling for rationalisation of duties on EV components, auto and component manufacturers are calling for stronger incentives to drive consumer adoption and greater support for localisation and charging infrastructure. Here are some key expectations industry experts have from the upcoming Union Budget.

Infrastructure development

“Looking ahead, we anticipate that the forthcoming Union Budget will foster the next phase of development by prioritizing impactful reforms aimed at enhancing the ease of doing business, deepening manufacturing localization, and advancing workforce skills in line with rapid technological advancements,” said, Vikram Gulati, Executive Vice President - Corporate Affairs and Governance, Toyota Kirloskar Motor.

Gulati further added, “We urge the Government to maintain its focus on infrastructure development and continue its sustained support for multiple green energy pathways to achieve India’s long-term goals of energy security and net-zero emissions. We remain confident that the upcoming Union Budget will continue to deliver balanced and forward-looking policy measures across industries, including the automobile sector, which is a vital contributor to economic growth and employment.”

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Building EV ecosystem

“As the Union Budget approaches, the industry will be looking for policy continuity and long-term clarity. Sustained support for domestic manufacturing and increased allocation for road and transport infrastructure will be key priorities. Rationalising the inverted duty structure for EVs will strengthen domestic manufacturing and competitiveness, and will further accelerate India’s transition to sustainable mobility, said Piyush Arora, MD & CEO of Skoda Auto Volkswagen India Pvt Ltd.

Arora added that continued focus on building the EV ecosystem, alongside measures that support household disposable incomes, will be essential to sustain demand momentum and reinforce the sector’s role in India’s broader economic growth.

Echoing similar sentiments, S. Raghav Bharadwaj, CEO & Founder at Bolt.Earth, said, “As we look towards the Union Budget 2026, India is presented with 2 critical opportunities to signal that the government views charging an EV as essential as buying one - First, the inverted Duty structure on EV charging, Currently, EVs are taxed at 5% GST, while charging services attract 18%. Reducing the inverted duty structure on charging services to 5% would lower costs for the end consumer, spurring growth.”

Bharadwaj continued saying, “Second, inclusion of EV charging infrastructure under Priority Sector Lending (PSL). This would unlock affordable capital for CPOs, businesses and startups, allowing us to move from installing thousands of chargers to millions.”

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Re-enforcement of PLI, PM E-DRIVE schemes

According to Parul Nagpal, Partner, Indirect Tax, EY India, expectations from Budget 2026 are centred on extending this momentum, particularly with a sharper focus on electric and green mobility. Analysts believe the government may consider enhancing subsidies or providing guarantees to accelerate EV adoption, especially in the two-wheeler, three-wheeler and commercial vehicle segments. 

There is also anticipation of fresh incentives to support domestic battery gigafactories, along with measures to strengthen charging infrastructure through tools such as viability gap funding or tax concessions. The budget is also expected to reiterate commitment to existing initiatives like the PLI schemes and PM E-DRIVE by ensuring adequate funding, smoother disbursement and better alignment between central and state incentives. Additionally, stakeholders expect updates on the proposed unified national EV digital super app under PM E-DRIVE.

Cost efficiency and maintaining global standards for tyre industry

Ahead of the Union Budget 2026–27, the tyre industry is seeking policy stability to support scale and manufacturing competitiveness. While infrastructure spending and rising demand for SUVs and premium vehicles have improved growth prospects, volatility in natural rubber prices remains a key concern. Given India’s reliance on imports, rationalising duties on critical raw materials could help stabilise costs and enhance global competitiveness.

For India to emerge as a global manufacturing hub for premium tyres, the Budget must deliver on three critical fronts: continued infrastructure capital expenditure to sustain automotive demand, enhanced export facilitation measures including duty drawbacks and logistics support, and stable trade policies on raw materials that provide cost predictability. These interventions would directly advance the Atmanirbhar Bharat vision while strengthening India's position in global automotive supply chains,” said, Harinder Singh, Managing Director & CEO, Yokohama India Pvt. Ltd.