Union Budget 2026-27: Its Significance for Consumers and the EV Industry.

The Union Minister of India, Nirmala Sitharaman showcased the budget for 2026, as it is specifically focussed towards the growth of Indian EV industry and would help the EV industry to accelerate EV adoption. Here are the various announcements made for the EV sector.

Duty Exemption on Lithium-ion Cell Production

The Government has decided to provide duty exemption on capital goods used for the manufacturing of lithium ion batteries, which will reduce the cost of making batteries in India. This will also encourage various new players to enter into the field of battery manufacturing and expand local factories instead of importing cells. 

It will also reduce the cost of electric cars, two-wheelers, and buses and will also improve battery availability, as there will be less dependence on imported batteries. However, this will also give more affordable EVs to the consumers with a better battery infrastructure and longer battery warranty periods, as the local manufacturing expands. 

Lower Duties for EV Minerals

The budget has also provided a customs duty exemption on capital goods which are important for processing critical minerals such as lithium, cobalt, and rare earth metals, which are crucial for the manufacturing of EV batteries and electric motors. 

This will further result in reduced costs of installing and maintaining mineral processing facilities in India, which will further result in enhancing the domestic value and reducing the dependence on imported materials. This will also help the EV automotive industry to witness stable input supplies and lower connection with the global price fluctuations.

Over a long period of time, this strategic move could result in increased cost efficiency, supply chain resilience and long-term reliability of electric vehicles for users. 

Construction of Rare Earth Corridors

With the increasing push for battery localisation for EVs, the government will be creating new rare earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu, and will be securing critical minerals which are essential for the making of EV batteries. 

This move has been initiated by the government as recently, China stopped the supplies of rare earth minerals from China and disrupted the local EV production across the country. Thus, these corridors will be spanning the full value chain, which will be conducting mining and processing for further research and development.

The Finance Minister, Sitharaman also expressed her views and said, “The Center will be working collaboratively with mineral-equipped states in order to establish cluster-based, plug-and-play ecosystems, which will encourage private investment in rare-earth processing and downstream manufacturing.” 

This announcement is aligned with the government’s rare earth magnet scheme, introduced in November 2025.