173 STATUTORY REPORTS | Management Discussion and Analysis India’s LCV industry (<3.5T) grew 9% in FY26 post a period of muted performance in FY24 and FY25, supported by GST rationalisation. While elevated fuel costs may exert some near-term pressure, growing organised trade, replacement demand, higher fleet utilisation, and continued government expenditure on infrastructure are expected to support the growth of the industry. India’s policy environment remains strongly supportive for the automobile industry, particularly in the areas of electric mobility, localisation, and advanced manufacturing. The PM E-DRIVE Scheme has emerged as the Government’s flagship EV incentive framework, replacing the earlier FAME-led structure. With an outlay of nearly Rs. 10,900 crore, the scheme focuses on accelerating adoption across electric two-wheelers, three-wheelers, buses, ambulances, and commercial vehicles while also supporting nationwide charging infrastructure expansion. Policy support for domestic manufacturing also strengthened significantly through Union Budget 2025, which introduced customs duty exemptions on critical lithium-ion battery components alongside increased support for EV manufacturing ecosystems. The Government continues to support the Auto Production Linked Incentive (‘PLI’) Scheme and the Advanced Chemistry Cell (‘ACC’) Battery PLI Scheme to improve domestic value addition, reduce import dependence, and strengthen India’s competitiveness within global EV supply chains. In 2026, policy focus has increasingly shifted towards strategic supply chain resilience. The Government announced the Rare Earth Permanent Magnet (‘REPM’) manufacturing scheme with an outlay of approximately Rs. 7,280 crore to strengthen domestic production of critical EV motor components and reduce reliance on imported rare earth supply chains. The Government is also expected to recalibrate localisation requirements under the PLI framework by easing domestic value addition thresholds that were initially difficult for manufacturers to meet. The revised framework is expected to improve compliance feasibility, broaden industry participation, and accelerate investments across EVs, batteries, and auto components. Meanwhile, India’s vehicle scrappage policy continues to emerge as a structural demand driver for both passenger and commercial vehicles. More than 4,30,000 vehicles had reportedly been scrapped by early 2026, supported by dedicated investments in recycling and scrappage infrastructure. The policy is expected to stimulate replacement demand, improve fleet efficiency, and accelerate the transition towards cleaner mobility. Overall, India’s automobile sector remains positioned for medium-term expansion despite near-term macro pressures. Strong domestic consumption, rising EV adoption, supportive industrial policy, improving localisation, and structural replacement demand continue to provide a favourable long-term growth outlook for the industry. Farm Equipment Sector The Union Budget 2026 signals a shift towards an income and enterprise-led growth strategy, with several measures aimed at enhancing farmers’ income, productivity, and entrepreneurship. Key initiatives include the integration of AgriStack with Indian Council of Agricultural Research (‘ICAR’) advisories and the promotion of high value crops to drive adoption and diversification. The Government’s sustained focus on sustainable farming practices, irrigation expansion, storage infrastructure, credit availability, and food processing capacity is expected to strengthen India’s position as a global food supplier while fostering enterprise driven growth in agriculture. Strong Government support continues to encourage the adoption of farm mechanisation and modern farming techniques, supported by broader rural development initiatives. Given India’s large base of small and marginal farmers and the relatively low penetration of mechanisation in many regions, the need for mechanised solutions is increasing. Persistent labour shortages and rising wage costs are expected to accelerate mechanisation adoption, supporting the long-term growth trajectory of the tractor and farm machinery market. International Operations Expansion in international markets is a key lever of growth for your Company’s Auto and Farm businesses. India’s expanding network of Free Trade Agreements (‘FTAs’) (such as the proposed India-EU FTA) presents significant opportunities by enabling access to key markets at preferential tariffs. Leveraging the competitive domestic auto and farm industries, these agreements can enable Indian manufacturers to access global markets with a sharper quality and cost proposition, enhancing export potential. In addition, such FTAs have the potential to create pathways for strategic partnerships with global technology firms. These collaborations can facilitate the localisation of advanced manufacturing technologies, strengthening India’s capabilities while supporting long-term growth and innovation in the auto and farm sectors.
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