Union Budget 2026: Auto Industry Applauds CNG Blending, Supports Local Battery Production

India's auto industry has responded swiftly to the Union Budget 2026, which delivered policy shifts poised to reshape the country's fuel and manufacturing landscape. After pushing E20 ethanol-petrol blending, the government has now taken its next big step by announcing phased blending of Compressed Bio-Gas (CBG) into CNG for transport. At the same time, the Budget reinforces India's localization push, with new duty exemptions and capital-goods incentives aimed at strengthening domestic battery manufacturing across EVs and consumer electronics. Together, these measures signal a clearer, long-term direction for cleaner mobility and deeper manufacturing capability, and the industry has plenty to say about it.

Society Of Indian Automobile Manufacturers

Speaking on the budget announcements, Mr Shailesh Chandra, President, SIAM and MD & CEO, Tata Motors Passenger Vehicles Ltd, said, "We welcome the Union Budget 2026-27, which continues to focus on long-term, sustained economic growth with a strong emphasis on manufacturing, infrastructure including freight corridors & waterways and fiscal prudence. The decision to raise the capital expenditure target to Rs 12.2 lakh crore for FY 2026-27 from Rs 11.2 lakh crore in the current year will provide a strong impetus to demand creation and industrial activity, including the Automobile sector.

Enhanced support for electronic components manufacturing, setting up dedicated corridors for mining and processing of rare earth, along with initiatives to establish high-tech tool rooms and supporting container manufacturing, will develop supply chain resilience and help in streamlining exports. The allocation of 4,000 e-buses for the Purvodaya States will accelerate the transition toward sustainable public mobility solutions.

Continued exemption of Basic Customs Duty on Capital Goods used for manufacturing lithium-ion batteries, along with the extension of concessional duty benefits for lithium-ion cells and their parts used in manufacturing batteries for electric and hybrid vehicles for a further two years till March 2028, will enable creation of a robust EV ecosystem in the country."

Mahindra Group

Dr Anish Shah, Group CEO & Managing Director, Mahindra Group on Budget 2026, said, "We applaud the Government of India's Union Budget 2026 presented today by Finance Minister Nirmala Sitharaman. This Budget focuses on enhancing India's competitiveness in the world, takes meaningful steps towards atmanirbharta and enables a wider participation in the benefits of economic growth.

The emphasis on frontier and strategic manufacturing sectors, including the launch of enhanced schemes such as Biopharma Shakti and the Semiconductor Mission (ISM 2.0), reflects a clear commitment to building global-scale manufacturing capabilities. Strengthening domestic value chains and reducing critical import dependencies will be key to India's future industrial leadership.

We particularly welcome the significant increase in capital expenditure to Rs 12.2 lakh crore for FY27, which underscores an unambiguous policy focus on infrastructure, regional development and job creation across the country. This will play a pivotal role in crowding in private investment, enhancing productivity and supporting the growth of tier-2 and tier-3 cities as emerging economic hubs.

The proposal to establish a dedicated Rs 10,000 crore SME growth fund and incentives for industry clusters is a positive step toward enabling future job creation, supporting enterprise scaling, and boosting competitiveness of small and medium businesses. Initiatives to promote critical minerals, rare earth corridors and enhanced electronics and capital goods manufacturing are forward-looking and essential for a resilient industrial ecosystem that can thrive amid global uncertainties. And, most importantly, the emphasis on sabka saath, sabka vikaas is commendable. The actions to ensure every community has access to resources and opportunities will enable robust and sustainable economic growth.

Overall, Budget 2026 signals continuity in policy direction, a firm commitment to sustainable and inclusive growth, and efforts to unlock India's economic potential at scale. We believe these measures can accelerate innovation, enhance value-added manufacturing and strengthen India's standing in the world."

Ashok Leyland

Mr. Dheeraj Hinduja, Chairman, Ashok Leyland, quoted, "The Finance Minister has presented a pro-growth, development-focused Budget aligned with the Prime Minister's vision of a competitive, resilient, and self-reliant India. Increased spending on Infrastructure, Manufacturing, and Defence-along with continued emphasis on roads, logistics, and construction-is expected to accelerate economic growth and drive demand in the commercial vehicle sector. The Budget also advances initiatives in AI, rare earths, and energy transition while supporting key sectors such as healthcare, education, agriculture, housing, and electrification. Overall, it sustains growth momentum and strengthens India's long-term economic trajectory."

Mercedes-Benz India

Mr. Santosh Iyer, MD & CEO, Mercedes-Benz India: "Budget's strong focus on infrastructural development, with addition of Rs 1 lakh crore in capex, is a step in right direction developing the country's evolving mobility ecosystem. Better highways and improved intercity connectivity have historically driven luxury car demand in India. The fiscal prudence reflected in the 4.3% deficit target, combined with strong focus on exports, sends a strong signal of macroeconomic stability, which may lead to a less volatile currency. Overall, the emphasis of the budget is on strengthening ease of doing business, and the deferral of customs duty payments up to 30 days, can improve cash flow significantly. This budget primarily focuses more on long-term gains, rather than immediate ones."

All India Distillers' Association

Speaking on the CNG blending announcement, Mr. Vijendra Singh, President, All India Distillers' Association (AIDA), said, "The Union Budget 2026 strengthens India's biofuel momentum at a critical inflection point for ethanol producers and distilleries. With the government advancing duty exemptions for biogas-blended CNG and reinforcing incentives for ethanol growth, the emphasis on digital agriculture through initiatives like Bharat Vistaar; a multilingual AI platform integrating Agri Stack and ICAR advisories, will further strengthen feedstock productivity and informed farm level decision-making. India's ethanol blending has surged from 1.5% in 2014 to nearly 19% today , reflecting the success of the Ethanol Blended Petrol programme and reinforcing energy security, farmer participation, and industrial value creation. Together, these measures enhance rural livelihoods, expand domestic fuel alternatives, and accelerate the transition toward cleaner, self-reliant energy."

Audi India

Mr. Balbir Singh Dhillon, Brand Director, Audi India, showed a warm acceptance to the Union Budget 2026, "The Union Budget's strong emphasis on infrastructure and capital expenditure is a positive enabler for India's mobility landscape. Improved highways and intercity connectivity, especially across Tier-II and Tier-III markets, are strengthening the ownership and usage ecosystem for luxury automobiles. The government's focus on fiscal prudence, macroeconomic stability, and ease of doing business reinforces confidence for long-term investments in the automotive sector.

Initiatives like the development of rare earth corridors and the advancement of ISM 2.0 under the India Semiconductor Mission are timely and critical. They signal a clear intent to build resilient domestic supply chains and a technology-driven manufacturing ecosystem that will support the future of automotive and electric mobility in India."

Hyundai Motor India

Speaking on the budget, Mr. Tarun Garg, MD & CEO, Hyundai Motor India Limited, said, "Further building on the mega GST 2.0 reforms, the Union Budget 2026-27 presents a long-term focused roadmap that accelerates India's rise as a global manufacturing hub and Atmanirbhar Bharat. Focus on the rare earth corridor, EV Battery and Electronics manufacturing, MSME empowerment, inclusivity and AI investments position India for global leadership. The strong push for tourism, rural growth and enhanced regional connectivity will further spur economic activity and open new avenues for advanced mobility, logistics and transportation solutions. With a bold capital outlay, simplified taxation and improved ease of doing business, this Budget is a decisive step towards a healthy and Viksit Bharat, reinforcing confidence in India's growth story."

Automotive Component Manufacturers Association

Commenting on the Budget, Vikrampati Singhania, President, ACMA and Vice Chairman & Managing Director, JK Fenner (India) Limited, said, "The Union Budget 2026-27 lays a clear and credible roadmap for strengthening India's manufacturing ecosystem. The sustained focus on MSMEs, clean mobility, and export facilitation will help the auto component industry navigate global headwinds while positioning India as a competitive and trusted manufacturing and sourcing destination."

Indian School for Design of Automobiles (INDEA)

Speaking on the Union Budget 2026, Mr. Avik Chattopadhyay, Chairperson, XADM & Founder, INDEA, said, "This Budget marks a pivotal shift from just 'assembling in India' to 'designing for India.' By eliminating duties on critical minerals and battery manufacturing tech, the government has moved beyond sticker-price subsidies to focus on the vehicle's actual 'soul' the battery and the chip. It is a pragmatic roadmap that allows Indian designers to finally innovate at the cell level, ensuring our future mobility is truly indigenous and not just a localized version of global products."

Industry reactions show broad support for Budget 2026, with automakers praising the push for CBG blending, EV ecosystem development, critical-mineral duty exemptions and higher capital expenditure. Together, companies view the Budget as strengthening clean mobility, manufacturing resilience and long-term economic growth across India's automotive landscape.