New Delhi: A sharp increase in funding for the Production Linked Incentive (PLI) scheme for automobiles and auto components in the Union Budget 2026 is expected to boost the adoption of electric vehicles and support domestic manufacturing of auto parts, according to a report by Axis Asset Management, ANI reported.
The Budget has raised the allocation for the PLI scheme for automobiles and auto components to Rs 59.4 billion for FY27, up from Rs 20 billion in FY26, marking a threefold increase. The report said the higher allocation reflects the government’s continued focus on strengthening domestic manufacturing and speeding up the shift towards electric mobility.
It noted that electric vehicle adoption in India is still at an early stage, with EVs accounting for about 5–6 per cent of total sales in the two-wheeler segment and around 3–4 per cent in passenger vehicles. According to the report, the increased PLI support is likely to encourage wider EV adoption while also promoting local manufacturing of auto components across the supply chain.
The report also highlighted the government’s focus on securing key inputs through plans to develop rare-earth magnet corridors. Under this initiative, the Centre will support states including Odisha, Kerala, Andhra Pradesh and Tamil Nadu. The move is aimed at reducing reliance on imported rare-earth magnets, which are essential for electric vehicles, and strengthening the reliability of the domestic EV supply chain.
In addition, the report pointed to measures announced in the Budget to support battery manufacturing. The government has extended the exemption on basic customs duty for capital goods used in the production of lithium-ion cells to also cover equipment used for making lithium-ion cells for battery energy storage systems.
The report said this step would support the growth of domestic lithium-ion battery makers and help expand battery manufacturing beyond electric vehicles to include energy storage systems, widening the market for locally produced cells.
The report stated that the combination of higher PLI funding and policy support for critical minerals and battery manufacturing is expected to provide a positive boost to the automobile and auto components sector.
