Union Budget 2025: Impact on the Auto Spare Parts Industry

The Union Budget 2025-26 has introduced significant changes that will affect the auto spare parts industry in India. With a strong emphasis on promoting domestic manufacturing and electric vehicles (EVs), the budget also brings challenges, such as the lack of GST reductions on auto parts. This blog explores the key takeaways and how they will shape the industry.

1. Increase in Customs Duty on Auto Components

What Changed?
The government has raised the customs duty on certain auto components to 15%. This move is aimed at reducing imports and strengthening the domestic manufacturing sector under the ‘Make in India’ initiative.

Impact:

• ✔ Boost for Local Manufacturers: Domestic auto part makers will benefit as imported components become more expensive.
• ❌ Higher Costs for Import-Dependent Businesses: Companies relying on imported parts may face increased procurement costs.

2. No GST Reduction for Auto Spare Parts

What Changed?
Industry stakeholders had requested a reduction in GST from 28% to 5-12%, but the budget did not announce any GST cuts for auto components.

Impact:

• ✔ No Immediate Price Drop: Auto parts will continue to attract high taxation.
• ❌ Burden on Consumers: Mechanics, repair shops, and vehicle owners will continue to bear high tax rates on spare parts.

3. EV Spare Parts Become More Affordable

What Changed?
The budget exempts customs duty on essential raw materials for electric vehicle production, including lithium-ion battery scraps and critical minerals (cobalt, lead, zinc).

Impact:

• ✔ Lower EV Spare Parts Costs: EV components will become more affordable, reducing repair costs.
• ✔ Push for Green Mobility: With EV parts becoming more accessible, the transition to electric vehicles will accelerate.

4. Increased Credit Support for MSMEs in Auto Spare Parts Manufacturing

What Changed?
The government has enhanced the credit guarantee cover for MSMEs, allowing them better access to loans and financing.

Impact:

• ✔ Easier Access to Funds: Small and medium auto parts manufacturers can expand operations more easily.
• ✔ Growth in Local Production: More businesses can invest in manufacturing, reducing dependence on imports.

5. Higher Disposable Income Could Boost Auto Parts Sales

What Changed?
The government has raised the income tax exemption to ₹12 lakh per year, increasing the spending power of middle-class consumers.

Impact:

• ✔ Higher Demand for Vehicle Servicing: With more disposable income, car owners may spend more on maintenance and repairs.
• ✔ Potential Increase in Auto Parts Sales: More repairs mean higher demand for spare parts.

Final Thoughts: The Road Ahead for the Auto Spare Parts Industry

The Union Budget 2025 brings both opportunities and challenges for the auto spare parts industry:

• ✅ Encouragement for Local Manufacturing with higher customs duty on imports.
• ✅ Lower EV Spare Part Costs promoting the electric vehicle sector.
• ✅ Improved MSME Credit Access aiding small auto parts businesses.
• ❌ No GST Reductions keeping auto part prices high.

For businesses in the auto spare parts sector, the key takeaway is to adapt to these policy changes by focusing on local sourcing and exploring the EV market.

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