“Incentives for electric vehicles and advanced automotive technologies should explicitly cover high-value subsystems such as electronics, sensors, control units, motors and mechatronic assemblies, rather than focusing only on final vehicle or module assembly. Without this, India risks remaining an assembly base while critical value and technology continue to be imported.” Adithya Jayakar, Deputy Managing Director, UCAL Ltd
As India prepares for the Union Budget to be presented on 1st February, we request the Honourable Finance Minister for bringing in a decisive shift in policy focus, from assembly-led growth to deeper value creation, stronger localization and resilient supply chains.
The true impact of the upcoming Budget will depend less on headline announcements and more on practical, execution-oriented measures that directly influence manufacturing costs, localization depth and global competitiveness.
The rollout of GST 2.0 has materially helped the automotive ecosystem by improving affordability, simplifying compliance and bringing greater predictability to taxation. For the auto components industry, this has stabilized demand and allowed manufacturers to plan production and investments with better visibility.
India’s localization strategy must move beyond assembly to genuine value creation. Incentives for electric vehicles and advanced automotive technologies should explicitly cover high-value subsystems such as electronics, sensors, control units, motors and mechatronic assemblies, rather than focusing only on final vehicle or module assembly. Without this, India risks remaining an assembly base while critical value and technology continue to be imported.
The Budget must directly address India’s dependence on critical materials, particularly rare-earth magnets and specialized alloys used in motors, actuators and electronic systems across ICE and EV platforms. We also propose concrete policy measures to strengthen domestic capabilities in processing, recycling and alternative material development, while also facilitating diversified sourcing to mitigate cost volatility and supply-chain risks.
There is a need for a fundamental realignment of customs duty structures to support domestic manufacturing. Duties on critical inputs, components and sub-assemblies where domestic capabilities are still evolving should be rationalized to improve the economics of localization. At the same time, finished-goods imports should face a calibrated but firm duty framework to discourage import-led substitution of local production.
These are the real levers that will determine the next phase of growth for the auto components sector: lower and more predictable manufacturing costs, deeper localization and supply-chain resilience. A Budget that addresses these directly will enable Indian component manufacturers to scale competitively and integrate more strongly into global value chains.
If the Budget delivers on these priorities, it could accelerate India’s transition from a cost-efficient manufacturing base to a technology-driven automotive hub, strengthening its position in global value chains and supporting long-term growth in the auto components sector.
The author is Adithya Jayakar, Deputy Managing Director, UCAL Ltd
