Budget 2026: Battery Manufacturing Duty Exemption Could Lower EV Prices For Buyers

Updated: Monday, February 2, 2026, 11:48 [IST]

The Union Government has announced several key measures for the automotive sector in the Budget 2026. Among them is the exemption of customs duty on capital goods used for manufacturing lithium-ion battery cells, a move aimed at reducing import dependence and strengthening India's EV ecosystem.

Budget 2026: Duty Exemptions For Battery Cell Manufacturing

EVs are seen as the future of mobility, and India, as one of the world's largest automobile markets, is steadily moving towards green mobility. Battery cells are a key component of any EV, and most electric vehicle manufacturers currently import machinery to manufacture these battery cells.

To become self-sufficient and independent, India needs to build its own EV infrastructure, enabling manufacturers to produce battery cells domestically. During the Budget 2026 announcement, a significant decision was made regarding the manufacturing of lithium-ion battery cells.

Under this initiative, customs duty has been exempted on the import of machinery used for manufacturing battery cells. The basic customs duty on capital goods used to manufacture lithium-ion cells has been extended until March 31, 2028. This exemption also includes Battery Energy Storage Systems (BESS).

Lowers the Cost of Machinery

Most companies and battery cell manufacturers import battery cell machinery from countries such as China, South Korea, and Germany. With this duty exemption, the cost of importing machinery and setting up manufacturing plants is significantly reduced. This will help manufacturers save capital, which can then be redirected towards research and development to improve battery cell efficiency.

Lower Battery Costs

The battery is a key component of an electric vehicle, which is nearly 40% of the total vehicle cost. With the government exempting customs duty on battery manufacturing machinery, production costs are expected to reduce, which could eventually translate into lower EV prices.

EVs to Become More Affordable

One of the biggest challenges with EVs is their higher cost. Despite having many advantages over ICE vehicles, EVs have not yet fully penetrated the mass market. With these duty exemptions, the prices of EVs could move closer to those of ICE vehicles in the next few years, making them more competitive and affordable.

BESS Storage System

EV charging infrastructure requires reliable power to charge vehicles. The Union Budget also includes customs duty exemptions for BESS systems. This allows manufacturers to develop their own charging grids at a lower cost. Older EV batteries can also be reused in BESS systems to support charging infrastructure, which increases the resale value of used EV batteries.