India's auto and electric vehicle sector stands at a crucial turning point as the Union Budget 2026 approaches. The industry has moved beyond early adoption phases and now demands policies that support execution, scale, and long-term manufacturing stability. Electric vehicle registrations surpassed 2.3 million units in 2025, representing nearly eight percent of total vehicle registrations. This clear momentum shows electric mobility is no longer experimental but a mainstream reality.
From Adoption Momentum to Manufacturing Reality
The EV ecosystem has matured significantly. Domestic manufacturing capability now determines the sector's future trajectory. Battery and vehicle production have progressed beyond limited assembly operations to genuine capacity creation. Multiple facilities are currently under development across the country.
Localization roadmaps have transformed into active execution plans. This shift brings critical challenges into sharp focus. Manufacturers must address capital intensity, supply-chain readiness, and operational efficiency. As production volumes increase, companies grapple with yield optimization, quality consistency, and reliability issues that naturally emerge during scaling.
This represents a structural shift for the entire sector. Policy support must evolve accordingly. The focus should move from stimulating adoption to enabling execution. Manufacturers need support to transition smoothly from commissioning phases to sustained commercial output.
Battery Demand Signals the Scale Ahead
The rapid rise in battery demand highlights the urgency of this manufacturing transition. ICRA estimates India's lithium-ion battery market could grow at 35–40 percent annually through 2030. This growth is driven primarily by electric mobility and energy storage applications.
Annual battery demand presents staggering projections. It is expected to surge from 17.7 GWh in 2025 to 256.3 GWh by 2032. This exponential growth places tremendous pressure on domestic manufacturing capabilities. Without timely capacity stabilization, the sector risks prolonged dependence on imports. Such dependence would expose manufacturers to currency volatility and geopolitical risks.
Execution Certainty and Access to Capital
For manufacturers, policy effectiveness depends equally on predictability and intent. The Advanced Chemistry Cell Production Linked Incentive scheme has established a foundation for domestic cell manufacturing. However, its real impact hinges on clarity around timelines, compliance requirements, and incentive disbursement processes.
Access to patient capital remains another critical factor. Battery manufacturing involves substantial upfront investments with long payback cycles. These often extend beyond seven years. Financing structures offering long-tenure, lower-cost capital can materially reduce risk for domestic players. Such financial support would accelerate capacity stabilization across the industry.
Infrastructure, Approvals, and Skilled Manpower
Manufacturing timelines frequently face non-technical constraints. Delays in land acquisition, power connectivity, environmental clearances, and product testing can significantly slow project execution. Streamlining approval processes and strengthening industrial infrastructure would help manufacturers move faster from commissioning to commercial production.
Simultaneously, skilled manpower availability is becoming a defining constraint. As battery manufacturing grows more complex, demand for trained technicians, quality engineers, and safety specialists continues rising. Industry-aligned skilling programs could improve productivity and reduce early-stage inefficiencies across manufacturing facilities.
Building a Circular and Resilient Value Chain
As battery volumes expand, recycling will play an increasingly strategic role. Clear policy direction on extended producer responsibility would establish necessary frameworks. Incentives for recycling infrastructure development could help create a circular ecosystem. This approach would strengthen resource security and ensure long-term sustainability for the EV sector.
The Union Budget 2026 presents a significant opportunity. It allows policymakers to recalibrate focus toward execution certainty, manufacturing depth, and ecosystem resilience. By prioritizing capital access, infrastructure readiness, skilled talent development, and circular economy principles, the Budget can help India's auto and EV sector achieve a crucial transition. The goal is moving from momentum-driven growth to durable industrial leadership in the global electric mobility landscape.
