Union Budget 2020: Increase in custom duties may have an adverse impact on India's nascent electric vehicle segment

Rajeev Chaba, president and managing director, MG Motor India, said, "We welcome the budget announcements to lift the overall consumer sentiment and bring the economy back into the growth trajectory. However, we feel that the customs duty hike on electric vehicles assembled in India from 10 to 15 percent is a bit harsh, as this may impact the nascent category which was beginning to expand off late."

The Society of Manufacturers of Electric Vehicles (SMEV) said the union budget may have a negative impact on the cost of electric vehicles. Sohinder Singh Gill, director-general of SMEV said, “Despite the adverse effect on the cost of electric vehicles, the increase in import duties on components is a rational step under 'Make in India' initiative. It will have a bit of an adverse impact on vehicles that have a high import content forcing manufacturers to either localise or pass the costs to customers."

Industry bodies Society of Indian Automobile Manufacturers (SIAM) and Federation of Automobile Dealers Associations of India (FADA) also expressed disappointment. Rajan Wadhera, president of SIAM, said, "The Indian auto industry was looking for some direct benefits in the budget, which could have helped revive demand in the context of the current slowdown and huge investment made by the industry for transition to BS-VI and from that aspect the budget speech was not what we were expecting."

India's auto sector had requested the government for an incentive-based scrappage policy, increased allocation for procurement of buses by state transport undertakings and a reduction in GST from 28 to 18 percent.

However, country's component sector welcomed the increase in the customs duties on auto components including catalytic converters as this would give an impetus to local manufacturing.