Budget 2026 extends EV duty relief, announces rare-earth corridors

India’s electric vehicle ecosystem received targeted policy support in the Union Budget 2026–27, with the government extending import duty relief for lithium-ion battery manufacturing and announcing new infrastructure plans for rare-earth minerals. These measures are aimed at strengthening domestic EV production and reducing supply-chain risks at a time when electric mobility adoption is steadily expanding across India.

Duty relief for lithium-ion battery manufacturing

The government confirmed the continuation of zero basic customs duty on capital goods used for manufacturing lithium-ion cells. Alongside this, the concessional basic customs duty of 5 percent on imported lithium-ion cells has also been extended.

These decisions are significant for battery manufacturers, as they provide cost stability for both setting up new facilities and scaling existing ones. Battery packs remain the most expensive component in an electric vehicle, and predictable duty structures help manufacturers plan investments and pricing more effectively.

Impact on EV costs and localisation efforts

Battery costs directly influence the final price of electric cars, scooters and motorcycles. By maintaining duty concessions on critical battery inputs, the budget supports efforts to keep EV prices competitive for Indian consumers.

At the same time, the policy continues to encourage gradual localisation. While imports are still required in the short term, the extension of incentives gives manufacturers time to build domestic capability without sudden cost pressures.

Rare-earth corridors announced for EV supply chains

A key structural announcement in the budget is the creation of dedicated rare-earth mineral corridors in Andhra Pradesh, Tamil Nadu, Kerala and Odisha. These corridors are intended to connect mining, processing and downstream manufacturing activities for rare-earth materials.

Rare earth elements are essential for EV components such as traction motors, power electronics and permanent magnets. At present, India relies heavily on imports for these materials, making the EV supply chain vulnerable to global disruptions.

Reducing dependence on imported critical materials

The rare-earth corridor initiative reflects a longer-term strategy to secure critical minerals for clean mobility technologies. By focusing on integrated infrastructure rather than isolated projects, the government aims to improve domestic availability and encourage value addition within India.

If implemented effectively, these corridors could support not only EV manufacturers but also component suppliers involved in motors and advanced electronics.

Why this matters for India’s EV sector now

The Budget 2026–27 combines short-term fiscal support with long-term supply-chain planning for electric vehicles. Continued duty relief helps manufacturers manage costs in the near term, while the rare-earth corridor proposal addresses structural gaps that could limit future growth.

Together, these measures reinforce the government’s commitment to building a resilient and competitive EV manufacturing ecosystem in India, with a focus on batteries and critical materials that underpin the transition to electric mobility.