Auto industry set for multi-segment growth following budget 2025 provisions, says FADA

The Federation of Automobile Dealers Associations (FADA) has released a comprehensive analysis of Budget 2025-26, projecting positive growth across various automotive segments due to targeted policy interventions and economic measures.

Rural demand for automobiles is expected to see a significant uptick, driven by the newly announced Dhan Dhanya Krishi Yojana covering 1.7 crore farmers across 100 districts. The scheme, coupled with an enhanced Kisan Credit Card loan limit of ₹5 lakh, is likely to boost sales of tractors, two-wheelers, and entry-level cars in rural markets.

"The transformation of India Post into a rural logistics hub, combined with MSME expansion initiatives, will create substantial demand for small commercial vehicles and cargo two-wheelers in rural areas," notes FADA in its analysis.

The budget's focus on MSMEs as the 'second engine of growth' has drawn particular attention. With expanded investment and turnover limits, more auto dealerships can now qualify for MSME benefits. The increase in credit guarantee cover to ₹20 crore for startups and the introduction of specialized ₹5 lakh credit cards for Micro SMEs are expected to stimulate commercial vehicle sales across segments.

On the manufacturing front, FADA highlights the positive impact of the National Manufacturing Mission on the electric vehicle sector. "The duty-free imports of lithium-ion battery components, combined with local manufacturing incentives, will make EVs more affordable and accelerate adoption," the analysis states.

The middle class stands to benefit from the raised income tax exemption limit of ₹12 lakh, which FADA believes will drive sales of SUVs, sedans, and premium two-wheelers. Additionally, the increase in FDI limits for insurance from 75% to 100% is expected to make vehicle insurance more affordable through increased competition.

The analysis concludes that all major segments - two-wheelers, passenger vehicles, commercial vehicles, and EVs - are positioned for growth, supported by a combination of rural income growth, tax benefits, improved financing options, and manufacturing incentives.