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Union Budget 2026: Impact on Automobiles and Ancillaries with Recommendations

By Prime Research | Updated at: Feb 2, 2026 04:37 PM IST

Union Budget 2026: Impact on Automobiles and Ancillaries with Recommendations
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Budget Highlights Impact Recommendations
The budgeted capex stands at Rs 12.2trn, which is 11.5% above the FY26 revised estimate and 9% above the FY26 budgeted estimate. Capex sale increase. Expectation of better execution of the budgeted capex augurs well for companies, driven by higher infrastructure and construction activities, like Ashok Leyland and Tata Motors CV.
Allocation to PLI for automobile and auto components stands at Rs 59.5bn, which is above the FY26BE of Rs 28.2bn though above the FY26RE of Rs 20.9bn. This indicates better progress of the PLI scheme. To benefit auto OEM and ancillaries who have qualified and ramping up production for the same.
Allocation to PLI for Advanced Chemistry Cell (ACC) Battery Storage stands at Rs 0.86bn, which is below the FY26BE level of Rs 1.56bn though above the FY26RE of Rs 0.13bn. This indicates slower progress of the ACC PLI scheme, also indicating challenges of certain companies to keep up with the PLI milestones. Negative for domestic EV battery makers who have qualified for ACC PLI.
Allocation to PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme stands at Rs 15.0bn, which is much below the FY26BE of Rs 40.0bn though above the FY26RE of Rs 13.0bn. This indicates lower support in terms of demand incentives for EVs, and instead depending on the GST differential to be the support. Negative for new-age EV companies.
Exempt value of Biogas/Compressed Biogas contained in blended CNG along with appropriate GST paid on it, from the value of such blended CNG for the purpose of calculation of Central Excise duty on such blended CNG. This will promote higher bio-gas blending with CNG and help lower running cost of a CNG vehicle. Positive for manufacturers of CNG vehicles like Maruti Suzuki, Hyundai Motor India, and Tata Motors PV.
Establishment of new Dedicated Freight Corridors connecting Dankuni in the East, to Surat in the West. Operationalizing 20 new National Waterways connecting mineral rich areas, industrial centers, and ports. Increasing competition with road freight can steal share of road freight. Negative for long haul trucks and thus Ashok Leyland and Tata Motors CV.
Proposal is to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish dedicated rare earth corridors to promote mining, processing, research, and manufacturing. Should lead to more control of rare earth supply chain. Positive for auto sector though over the medium to long term.
Addition of various capital goods for EV battery manufacturing to the list of exempted capital goods. To lower the cost of EV battery manufacturing in India. Positive for domestic EV battery manufacturers.
Purvodaya will see the provision of 4,000 e-buses. Continued focus by the government towards e-buses. Positive for e-bus manufacturers like Ashok Leyland, Tata Motors CV, VECV and so on.

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