The Union Budget 2025 prioritises economic growth, focusing on domestic production, infrastructure, and technology development. One of the key highlights includes tax exemptions to make EVs affordable. Customs duty reductions on lithium-ion batteries and incentives for local EV manufacturing will help lower electric vehicle costs. Some policies were also introduced to support clean tech adoption. Increased consumer demand and industry growth are expected, alongside rising insurance needs for electric two-wheelers, ensuring financial security in India’s expanding EV sector.
The Union Budget 2025 has introduced transformative measures to accelerate the growth of India’s electric vehicle (EV) sector. By focusing on affordability, domestic manufacturing, and infrastructure development, the budget aims to make EVs more accessible to consumers while strengthening India’s position as a global EV hub. Incentives for clean tech manufacturing provide a robust framework for sustainable mobility and economic growth in the EV sector. The importance of two-wheeler insurance also remains crucial as more people invest in electric mobility.
Tax Relief and Policies in Union Budget 2025 That Can Accelerate the EV Sector
The 2025 budget introduces various measures to bolster the EV industry. This may raise the demand for electric two-wheelers.
1. Reduction in Customs Duty on Lithium-Ion Batteries
A game-changing move in this budget is the full exemption of customs duties on lithium-ion battery materials. Batteries account for around 40% of an electric vehicle’s cost, and reducing import costs will directly impact the final price of electric two-wheelers.
Manufacturers approved under the ACC PLI scheme will benefit significantly from this tax exemption. Additionally, it will help meet domestic value addition criteria, ensuring that India moves closer to becoming a self-reliant EV manufacturing hub.
2. Boosting Local Manufacturing with Lower Import Duties
The budget restructures customs duties on automotive imports to encourage domestic production. For example, a reduction in duties on Completely Knocked Down (CKD) and Semi-Knocked Down (SKD) kits for internal combustion engines (ICE) of motorcycles will promote local assembly.
For electric motorcycles, while the duty structure remains unchanged, the broader push towards EV adoption ensures continued momentum in this segment. High-end global brands entering India will also benefit from this restructured taxation policy.
3. Policy Push for Clean Tech Manufacturing
To support the transition towards cleaner transportation, the government has provided strong backing for clean tech manufacturing. The focus is on reducing dependency on imports and promoting local production of critical EV components, such as batteries, motors, and controllers.
The zero-duty import of additional capital goods for EV battery manufacturing is a major step. This policy will enable manufacturers to scale up production efficiently and reduce costs. By encouraging local sourcing, the government is ensuring long-term sustainability for the EV sector.
4. Tax Relief and Its Impact on Electric Two-Wheelers
One of the most notable aspects of the budget is the tax exemption for individuals earning up to ₹12 lakh. With higher disposable income, more people can consider upgrading their vehicles and buy electric two-wheelers. These automobiles offer lower operational costs and are environmentally friendly. This increased affordability will particularly benefit first-time buyers in urban and semi-urban areas. The entry-level two-wheeler segment has been growing slowly, but the revised tax structure is expected to revive demand.
5. Support for the Gig Economy and Last-Mile Delivery
With incentives for EV adoption, delivery businesses and e-commerce platforms will find it more viable to switch to electric fleets. This will lead to higher demand for electric two-wheelers in the logistics sector, further boosting the industry.
5. Comprehensive Policy Framework for EV Adoption
Beyond tax relief and duty exemptions, the budget sets the stage for long-term EV growth through continued policy support. The focus on ‘Make in India’ and infrastructure expansion will contribute to building a robust EV ecosystem.
6. Rural Markets and the Rise of Electric Two-Wheelers
The budget’s emphasis on rural development, through schemes like the Dhan Dhanya Krishi Yojana, is expected to drive demand for electric two-wheelers in smaller towns and villages. With 170 million farmers benefiting from improved income and credit access, rural households will have greater purchasing power.
Electric two-wheelers provide an economical and sustainable solution for last-mile connectivity. They are ideal for agricultural workers and delivery businesses in rural areas, where fuel-based vehicles are often expensive and inaccessible.
Market Impact and Industry Response
Here is how the Union Budget 2025 impacts the automobile industry:
- Boost for Domestic EV Manufacturers: Major brands like Ola Electric, Ather, Bajaj, and TVS are expected to benefit from reduced production costs due to tax reliefs, enhancing their competitiveness.
- Increase in Consumer Demand: The combination of tax incentives and increased disposable income is projected to drive higher electric two-wheeler sales.
- Challenges for ICE Two-Wheelers: Internal Combustion Engine (ICE) two-wheelers may face pricing pressures as EVs become more affordable, prompting a potential shift in consumer preference.
Future Outlook: Growth Projections for Electric Two-Wheelers
The electric two-wheeler market in India is poised for exponential growth. Some of the anticipated changes include:
- Sales Growth: Industry analysts anticipate a significant increase in EV sales in India, driven by supportive fiscal policies and growing environmental awareness.
- Charging Infrastructure Expansion: The development of extensive charging networks is crucial to support the anticipated growth in EV adoption.
- Electrification Goals: India aims to achieve substantial electrification of the two-wheeler segment by 2030, aligning with global sustainability targets.
Role of Insurance in the Growing Two-Wheeler Market
As more consumers invest in electric two-wheelers, ensuring financial security for their prized possessions becomes crucial. The rise in EV adoption necessitates the importance of comprehensive bike insurance. With the growing market, insurance policies must evolve to cover battery degradation, charging infrastructure, and specialised repairs.
With government incentives making EVs more accessible, consumers should consider insurance policies that offer full protection, including theft, accidental damage, and third-party liabilities. Proper coverage ensures long-term financial security for EV owners.
Conclusion
Union Budget 2025 has laid a strong foundation for the growth of the electric two-wheeler market in India. The EV industry is set for expansion with tax relief, lower import duties, and policy changes. These measures not only promote clean mobility but also strengthen India’s position as a global EV manufacturing hub. With a continued focus on innovation and affordability, electric two-wheelers are poised to become the preferred choice for millions of consumers.
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.
