Exemption of Customs Duty on Critical Minerals Expected to Boost Electric Vehicle Market
In a move that is set to significantly impact the electric vehicle (EV) market in India, the Union Budget 2024-25 has proposed the full exemption of customs duty on 25 critical minerals. Finance Minister Nirmala Sitharaman announced this exemption, stating that it will help reduce battery production costs and make EVs more affordable. The exemption covers minerals such as lithium, cobalt, copper, and rare earth elements, which are essential for industries like nuclear energy, renewable energy, space, defense, telecommunications, and high-tech electronics.
The electrified automotive industry has responded positively to this announcement. Vinod Aggarwal, President of the Society of Indian Automobile Manufacturers (SIAM), commended the exemption of customs duties on critical minerals and the extension of concessional customs duty on Li-Ion cells until March 2026. Aggarwal believes these measures will drive growth in the Indian auto industry.
Shradha Suri Marwah, President of the Auto Component Manufacturers Association (ACMA), also expressed support for the reduced customs duty on critical minerals, emphasizing that it will encourage cell manufacturing in India and contribute to the growth of the EV ecosystem. Rajat Mahajan, a partner at Deloitte India, sees this move as an encouragement for players to localize battery production, further strengthening the domestic EV supply chain.
While the exemption of customs duty on critical minerals has been met with widespread appreciation, some stakeholders have expressed concerns about the budget’s lack of direct incentives for the automotive sector. Rajat Mahajan pointed out the absence of direct benefits related to FAME III subsidies and other EV-related incentives. Nonetheless, stakeholders remain optimistic about the future of EVs in India.
Utkarsh Singh, Co-Founder & CEO of BatX Energies, recognizes the significant impact the exemption will have on lowering production costs for battery manufacturing and recycling. Singh believes this will ultimately make EVs more affordable and accessible in India.
Industry leaders in both the automotive and EV sectors view the budget as pivotal to the future of sustainable mobility in India. Pawan Munjal, Executive Chairman of Hero MotoCorp, believes it positions India as a technology-driven and knowledge-led economy committed to sustainable development. Likewise, Dheeraj Hinduja, Executive Chairman of Ashok Leyland, and Santosh Iyer, MD & CEO of Mercedes-Benz India, commend the budget’s focus on sustainable mobility and its contributions to building a stronger foundation for the Indian economy.
Infrastructure development took center stage in the budget, with Sudarshan Venu, MD of TVS Motor Company, highlighting the government’s priority on infrastructure rollout. He believes this will have a multiplier effect on the Indian economy. Mahesh Babu, CEO of SWITCH Mobility, mentioned the budget’s crucial support for the EV ecosystem, even though there may not be a direct EV scheme like FAME III.
The exemption of customs duties on critical minerals aligns with India’s goal of promoting domestic manufacturing and reducing reliance on imports. According to Mahadevan Seetharaman, a partner at Bain & Company, regulatory support like this plays a vital role in driving domestic EV and battery energy storage system (BESS) deployments.
Several industry experts also highlighted the budget’s support for infrastructure projects. Yatin Gupte, Chairman & Managing Director of Wardwizard Innovations & Mobility, noted the substantial boost for the automotive sector through fiscal support for infrastructure. Chakravarthi C, Managing Director of Quantum Energy, praised the budget for addressing the need for capital and skill development in the EV sector.
Pratik Kamdar, CEO & Co-Founder of Neuron Energy, believes the exemption of customs duty on critical minerals will drastically lower production costs for battery cells. As a result, EVs are likely to become more economically viable for consumers. Uday Narang, Founder and Chairman of Omega Seiki Pvt Ltd, highlighted the budget’s focus on women-led development and its substantial allocation for schemes benefiting women and girls. Narang believes such initiatives promote inclusivity and empowerment within the industry.
In conclusion, the proposed exemption of customs duty on critical minerals in the Union Budget 2024-25 is set to make a considerable impact on the EV market in India. The reduction in battery production costs will make EVs more affordable and propel the growth of renewable energy, sustainable mobility, and domestic manufacturing. Despite concerns about the absence of specific incentives for the automotive industry, stakeholders remain optimistic about the government’s support for infrastructure development and the overall evolution of the EV ecosystem in India.
