India’s automobile sector is looking at Budget 2026 as a crucial moment after years of uneven recovery. With passenger car demand stable but entry-level vehicles and EV two-wheelers struggling, the industry expects tax relief, affordable financing and policy support.
Auto Sector Eyes Big Boost from Budget 2026 Reforms
New Delhi: After years of sluggishness and uncertainty, India's automobile sector is slowly returning to normal. Improved sales since September 2025, the impact of GST reforms, and increased demand during the festive season have provided relief to the industry. Consequently, the Union Budget 2026-27, to be presented on February 1, is considered crucial for the auto industry. The industry is keenly watching to see if the budget will help stabilize demand, reduce cost pressures, and restore confidence.
The automobile sector contributes approximately 7 percent to India's GDP and is considered the backbone of the manufacturing economy. This sector employs millions of people and drives many industries such as steel, electronics, and rubber. However, rising costs, inflation, and regulations have increased pressure on the industry in recent years.
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Industry data shows that the recovery has not been uniform across all segments. Demand for premium and high-end passenger cars remains strong, but entry-level cars and two-wheelers are still struggling. It's a welcome sign that rural vehicle demand has improved, a positive sign for the future.
Inflation and affordability are the biggest challenges today. New safety technologies, emission regulations, and features have driven vehicle prices higher. Vehicle ownership in India remains low-only 26 cars per 1,000 people. Experts believe that if the budget includes measures such as affordable financing, tax relief, and lower running costs, ordinary customers could return.
There are high expectations for electric vehicles, but growth, especially in the electric two-wheeler segment, has slowed. Easy loans, subsidies for rural areas, and duty relief on batteries and other key components could boost the EV sector. Demands for reducing GST on charging services are also gaining momentum.
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The vehicle scrappage scheme has not yet achieved the desired impact. Greater tax benefits and exemptions for scrapping old vehicles could boost demand for new vehicles. It is also important to simplify customs regulations for supplier companies and encourage investment in smaller cities.
Overall, Budget 2026 could prove to be a turning point for the auto industry. With the right policy support, this sector will not only accelerate its growth but also provide a boost to the country's economic growth.
