India’s Union Budget 2026–27 has delivered a strong policy signal for the electric vehicle (EV) sector by focusing on battery manufacturing, infrastructure creation, and long-term industrial growth. At the heart of this push is the Customs duty exemption on lithium batteries, a move widely welcomed by the automobile industry for its potential to strengthen India’s EV ecosystem.
Customs Duty Relief to Strengthen EV Infrastructure
The budget proposes extending the basic customs duty (BCD) exemption on capital goods used for manufacturing lithium-ion cells. Importantly, this benefit has now been expanded to include capital goods required for producing lithium-ion cells for Battery Energy Storage Systems (BESS). According to SIAM, this Customs duty exemption on lithium batteries will significantly reduce production costs and help scale up EV infrastructure across the country.
Additionally, the government has expanded the exemption list by adding 35 more capital goods specifically used in EV battery manufacturing, making domestic production more viable and competitive.
Policy Continuity Boosts Investor Confidence
SIAM President Shailesh Chandra highlighted that continued policy support is critical for the sector. The extension of concessional customs duty benefits for lithium-ion cells, and their parts used in electric and hybrid vehicles, has been extended for two more years, until March 2028. This Customs duty exemption on lithium batteries provides much-needed certainty for investors and manufacturers planning large-scale battery “gigafactories” in India.
The budget also proposes full customs duty exemptions on capital goods required to process critical minerals such as lithium, cobalt, and rare earth elements within India, strengthening supply-chain security.
Capital Expenditure and Public Mobility Get a Boost
Beyond batteries, the Union Budget 2026–27 maintains its focus on manufacturing and infrastructure-led growth. The central government has raised its capital expenditure target to ₹12.2 lakh crore, up from ₹11.2 lakh crore in the current year. This increase is expected to stimulate industrial activity and vehicle demand, benefiting the automobile sector as a whole.
The allocation of 4,000 e-buses for the Purvodaya states is another key highlight. SIAM believes this will accelerate the shift toward clean, sustainable public mobility in eastern India.
Industry Sees Long-Term EV Affordability
Industry bodies such as SIAM and FADA have noted that by targeting inputs rather than just finished vehicles, the budget structurally improves EV affordability. The Customs duty exemption on lithium batteries is expected to lower costs, encourage domestic manufacturing, and reduce import dependence—laying a strong foundation for India’s green mobility future.
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