No Fireworks for Auto, but Some Fuel for EVs and Infrastructure

Union Finance Minister Nirmala Sitharaman’s Budget 2026–27 did not deliver any headline-grabbing announcements for the automotive industry. It can either be seen as a dampener, or a case of ‘no news is good news’. However a closer look shows that there may be a steady, layered policy approach in the announcements that broadly favours manufacturing, electrification, and mobility infrastructure. In other words, the government has stuck with the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, allocating ₹1,500 crore for FY27. This signals that New Delhi remains committed to electrification, even if the pace of spending is more measured than some in the industry had hoped.

For electric two- and three-wheelers — the real volume drivers of India’s EV story — this is crucial. The scheme continues to act as a bridge between consumer demand and OEM investment, even as the market slowly learns to stand on its own feet.

Increased PLI Funding  

Probably the most consequential line item for automakers in the latest Union Budget  is the jump in funding for the Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components — up to ₹5,940 crore for 2026–27 from ₹2,091 crore in revised estimates for the previous year.

This is less about short-term sales and more about long-term capability building: advanced powertrains, battery localisation, vehicle electronics, and deeper supplier integration. It can also be seen as a reflection of a belief that tomorrow’s Indian auto industry will be more electric, more digital, and more locally engineered.

Benefits for BESS, Semiconductor makers

A standout, though less-discussed, move is the tenfold increase in Viability Gap Funding for Battery Energy Storage Systems (BESS) — rising to ₹1,000 crore, from ₹100 crore in the previous Union Budget. Many Indian companies, including the Ratan Tata founded EV powertrain maker Elactra EV, are betting on BESS as a major growth area. 

This matters for EVs far more than it may appear. Better energy storage means a more stable grid, more reliable fast-charging networks, and lower long-term infrastructure costs — all essential ingredients for mass EV adoption.

The ₹1,000-crore allocation to India Semiconductor Mission 2.0 is strategically significant. As vehicles become rolling computers, chip localisation becomes more critical. This move aligns well with the auto industry’s push to reduce import dependence and supply-chain risks.

The government’s higher allocation of ₹18,000 crore (up from ₹15,671 crore last year) for the Reform-Linked Distribution Scheme can also have an indirect impact on the EV industry. A healthier, more efficient power distribution network directly benefits public charging rollout, depot electrification, and fleet operators.

Enhanced road infrastructure allocation 

Road infrastructure remains a cornerstone of India’s mobility story. The Budget raises NHAI’s allocation to ₹1,87,293 crore (up from ₹17,0266 crore last year), along with higher spending on road works.

Better highways have a predictable impact: stronger passenger vehicle demand, higher freight movement, and healthier commercial vehicle sales. For automakers, this is a slow-burning but powerful tailwind.

EV focus

Big-ticket spending on metros and urban transport continues, which increasingly means more e-buses, electric last-mile solutions, and integrated mobility systems. Under the Government’s Purvodaya scheme to boost infrastructure and urban transportation, the Finance Minister announced a plan to introduce 4,000 electric buses in the Eastern and North Eastern regions of the country.

The NCR Transport Corporation also receives steady funding — reinforcing the shift toward cleaner, regional mass transit.

Union Budget 2026–27 doesn’t offer any big ticket announcement for the automotive industry, but some of the announcements will bode well for automotive players, particularly in the EV ecosystem.

“The Union Budget 2026–27 lays a clear and credible roadmap for strengthening India’s manufacturing ecosystem. The sustained focus on MSMEs, clean mobility, and export facilitation will help the auto component industry navigate global headwinds while positioning India as a competitive and trusted manufacturing and sourcing destination," Vikrampati Singhania, President, ACMA and Vice Chairman & Managing Director, JK Fenner (India) Limited, said in a statement.

It backs manufacturing through PLI, supports EV adoption through E-Drive, strengthens the grid through battery funding, and also focuses on roads and urban mobility. Together, these create a policy ecosystem that nudges India’s auto industry toward a cleaner, more tech-driven future.

“We welcome the Union Budget 2026–27, which continues to focus on long-term, sustained economic growth with a strong emphasis on manufacturing, infrastructure including freight corridors & waterways and fiscal prudence. The decision to raise the capital expenditure target to Rs 12.2 lakh crore for FY 2026-27 from Rs 11.2 lakh crore in the current year will provide a strong impetus to demand creation and industrial activity, including the automobile sector," said Shailesh Chandra, President, SIAM and MD & CEO, Tata Motors Passenger Vehicles Ltd.

"Initiatives like the development of rare earth corridors and the advancement of ISM 2.0 under the India Semiconductor Mission are timely and critical. They signal a clear intent to build resilient domestic supply chains and a technology-driven manufacturing ecosystem that will support the future of automotive and electric mobility in India," said Balbir Singh Dhillon, Brand Director, Audi India.