"To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles."

This was the most important announcement made by the Finance Minister in Budget 2023 with respect to the EV industry.

• The government has removed custom duty on capital goods/machinery required for manufacturing lithium-ion cells used in EV batteries. EV industry experts were unanimous in saying that this move will help in reducing the cost of EVs in the country and shall facilitate faster penetration. Capital goods & machinery required for lithium-ion cell manufacturing were levied with custom duties ranging from 5% to 20%. Now, this has been exempted till March 31, 2024.
• Promoting green mobility was a key focus area of the budget. 
• The budget has also considerably increased the allocation of funds under FAME-II, which provides incentives to EV buyers in form of an upfront reduction in the product prices. In the previous financial year, the allocation was Rs 2908 crores, whereas in 2023-24, it will be Rs 5172 crores.
• The existing concession in duty of imported battery cells have been extended by another year.
• Another important initiative, which is making EV industry players call this budget ‘Pro-EV’, is the reduction in custom duty from 21% to 13% on lithium-ion batteries.
• The budget also announced a policy to replace old vehicles of the central government. The Finance Minister also mentioned that ‘states will also be supported in replacing old state government vehicles & ambulances’. This step may lead towards a transition as central government and various state governments may opt for EVs in place of conventional vehicles. The Ministry of Road Transport and Highways tweeted this following the announcement:

• Custom duty has been increased on EVs imported in Semi-Knocked Down (SKD) form and Completely Built Unit (CBU) form. An industry expert took this move positively and stated that this increase in custom duty will help promote domestic manufacturing in times to come.

Battery manufacturing is a capital-intensive step in the entire EV manufacturing process and the decision to exempt capital goods & machinery required for manufacturing Li-ion cells will definitely help in reducing EV prices and hopefully changing people’s opinion that EVs are too expensive.

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