The automobile industry is one of the most rapidly evolving sectors globally—and government policies are at the steering wheel. In 2025, both Indian and global automotive landscapes are experiencing a seismic shift due to policy changes, green mandates, safety norms, and EV push.
If you’re an auto enthusiast, car buyer, or industry professional, understanding these policies is key to staying ahead. So, let’s explore the most impactful government policies influencing the Indian and global auto sector in 2025.
Indian Auto Industry – Policy Highlights in 2025
FAME-II Extension & EV Push
The Indian government continues to support EV adoption through the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme. Extended into 2025, the policy offers:
- Subsidies on electric two-wheelers, cars, and buses
- Focus on localized EV component manufacturing
- Lower GST (5%) on EVs
Impact:
EV sales have jumped by over 30% year-on-year, and cities like Delhi, Bengaluru, and Pune are becoming EV hotspots.
Vehicle Scrappage Policy
Launched to phase out old and polluting vehicles, this policy mandates:
- Private vehicles older than 20 years
- Commercial vehicles older than 15 years
- Must undergo a fitness test or be scrapped
- Benefits for Consumers:
- Discount on new car purchases
- Tax concessions and scrap value incentives
Impact:
A surge in new vehicle demand and reduction in CO₂ emissions.
Production Linked Incentive (PLI) Scheme
The auto sector is a major recipient of the PLI scheme, especially for:
- Advanced chemistry cells (ACC batteries)
- Electric and hydrogen fuel cell vehicles
- Auto components
Impact:
Boosts domestic manufacturing, attracts foreign investment, and creates jobs.
New Safety Norms (Bharat NCAP)
From 2025, India has adopted its own crash-test safety rating system – Bharat NCAP. Vehicles will now get:
- 1 to 5-star ratings based on crash performance
- Mandatory 6 airbags in all passenger vehicles
- ADAS (Advanced Driver Assistance Systems) features encouraged
Impact:
Improved car safety awareness and consumer trust.
BS-VI Stage 2 Emission Norms
In a bid to clean the air, India is now enforcing BS-VI Stage 2 norms for petrol and diesel vehicles.
- Real Driving Emission (RDE) testing mandatory
- On-board diagnostics (OBD) improved
- Heavier penalties for non-compliance
Impact:
Cleaner air, but also a price hike in new BS-VI compliant vehicles.
Global Auto Policies Influencing the Industry in 2025
European Union: Zero Emission by 2035 Roadmap
The EU is pushing hard for a green future with:
- Ban on new petrol/diesel car sales by 2035
- High taxes on CO₂-heavy vehicles
- Grants for EV infrastructure and charging stations
Impact:
European automakers like Volkswagen, BMW, and Renault are accelerating EV production and phasing out ICE models.
U.S. Clean Car Regulations & IRA Incentives
The U.S. government under the Inflation Reduction Act (IRA) is:
- Offering tax credits for EV buyers (up to $7,500)
- Investing in battery supply chains
- Imposing stricter emission rules on car manufacturers
Impact:
Tesla, Ford, and GM are scaling up EV fleets. More affordable EVs are entering the market.
China’s Dominance Through Policy
China leads in EV adoption due to:
- Aggressive subsidies and incentives
- Massive investment in charging networks
- Strict quotas for new energy vehicles (NEVs)
Impact:
Brands like BYD and NIO are expanding globally, even entering Indian and European markets.
Global Carbon Credit Systems
Nations are implementing or expanding carbon credit trading systems that penalize automakers exceeding CO₂ limits. Automakers must:
- Offset emissions via green investments
- Manufacture a certain quota of low/zero-emission vehicles
Impact:
Forces traditional brands to innovate and go electric faster.
The Big Picture: Policy = Progress
In 2025, policies are more than rules—they are powerful tools guiding the evolution of the automobile industry.
| Policy Type | India | Global |
|---|---|---|
| EV Subsidies | FAME-II | IRA (US), EU Grants |
| Emission Norms | BS-VI Stage 2 | Euro 7, U.S. EPA |
| Safety Norms | Bharat NCAP | Euro NCAP, NHTSA |
| Ban on ICE Vehicles | In planning | Already set for 2035 (EU) |
The common thread? Sustainability, safety, and smart mobility
What This Means for You (Reader/Buyer)
Car Buyers: Expect more eco-friendly options, better safety, but slightly higher prices due to compliance costs.
Auto Enthusiasts: A chance to witness one of the biggest revolutions in auto history.
Industry Professionals: An urgent call to adapt, upskill, and innovate.
Final Thoughts:
The Road Ahead
From electric dreams to emission goals, government policies are shifting gears hard in 2025. Whether in India or across the globe, automakers are rethinking design, production, and pricing strategies. For consumers, the result is a smarter, cleaner, and safer drive into the future.