India’s EV Ambitions Will Meet Hard Reality Heading into 2026
India’s EV momentum slowed in 2025 as GST cuts on internal-combustion vehicles and price sensitivity exposed gaps between ambitious targets and market realities.
The year 2025 was expected to be a promising year for electric vehicles (EV) in India. Sales were higher than ever, new global brands entered the market and investment commitments around charging increased. But the year also exposed how the EV momentum, while moving, is dependent on multiple factors. Policy shifts affected consumer behaviour, hybrids found more favour and the adoption of EVs proved to be more price sensitive than expected.
The coming year will test whether electric adoption in India can move beyond the early adopters.
The Big Picture
In a highly segmented auto market, two-wheeler EV sales cooled in 2025 after years of rapid growth as buyers drifted back to petrol-powered models. Passenger four-wheeler EVs faced headwinds after GST cuts on internal-combustion cars shifted demand toward conventional vehicles, clouding India’s electrification push.
Niti Aayog’s roadmap targets EVs to make up 30% of private car sales and 80% of two- and three-wheelers by 2030. But analysis by International Council on Clean Transportation (ICCT) accessed by The Core shows that public targets from major automakers point to a more conservative outcome, with EVs expected to account for about 20% of fleet-average sales. It states that even the soon-to-be-finalised draft of Corporate Average Fuel Efficiency-III (CAFE) norms would translate into just 10–11% EV sales by the end of the decade—highlighting a growing disconnect over where the industry is headed.
“The draft CAFE-3 norms need a much stronger focus on electric vehicles if India is to reach its 30% electrification target by 2030,” said Amit Bhatt, India managing director at ICCT, a nonprofit public policy think tank and research institute.
Passenger Vehicles: Growing But Fragile
Electric car sales continued to rise through 2025. FY26 retail volumes reached 118,000 units between April and November, surpassing the 107,000 units in all of FY25. EV penetration climbed to 3.8%, up from 1.9% a year earlier, driven by rapid expansions from JSW MG Motor India and Mahindra & Mahindra, intensifying competition with the market leader, Tata Motors.
According to data sourced from automotive intelligence firm JATO Dynamics, mid-size electric SUVs account for the largest share of the market at 60%, followed by entry-level SUV models at about 19%.
The market reached another milestone during the year. Total EV registrations, excluding hybrids, surpassed 2.02 million units. Kerala led EV adoption with penetration of 8.4%, supported by high consumer awareness and a relatively mature local ecosystem. Delhi, Maharashtra, Karnataka, Tamil Nadu, Odisha and West Bengal—each with penetration above 4%—are driving national momentum, aided by urban demand and supportive state policies.
After years of competition dominated by Japanese, South Korean and domestic automakers in the internal-combustion segment, India’s EV market began to broaden in 2025 with the entry of new global players. US carmaker Tesla and Vietnam’s VinFast launched models this year and are expected to see their first meaningful traction in 2026.
However, the impact of GST cuts on internal-combustion vehicles is already visible in slowing EV demand. October, marked by key festivals such as Dussehra, Diwali and Dhanteras, saw a sharp pickup in ICE sales, boosted by festive buying, tax cuts and the wedding season. Electric vehicles, despite steep discounts, failed to generate comparable momentum among consumers, sales data shows. Parallely, hybrid vehicle sales continue to grow.
Even the luxury car segment was not immune. Santosh Iyer, managing director and chief executive officer of Mercedes-Benz India, told The Core that despite operating at the top-end of the market, the company has seen entry-level EV demand soften.
“What the industry needs is regulatory clarity so companies can commit capital with a long-term view. Vehicles are big ticket purchases, and consumers will ultimately gravitate toward the most affordable technology. Scale will come only through firm regulation — without it, demand will keep oscillating around incentives,” Bhatt pointed out.
He further stated, “There is no rationale in pivoting to interim technologies like hybrids when electric vehicles are the stated end goal.”
Even so, the industry remains split. Maruti Suzuki and Toyota Kirloskar have doubled down on hybrids, while Hyundai and Mahindra & Mahindra — earlier less inclined — are now warming to the technology, with Hyundai announcing hybrid launches and Mahindra saying it is exploring the option.
Tata Motors, which has said it would consider hybrids if demand rises but does not back government incentives for the technology, on Tuesday confirmed plans to enter the premium EV segment under the Avinya brand by end-2026. The launch will follow the Sierra EV and an updated Punch EV in the first half, with the three models anchoring its next EV wave and three more nameplates planned by FY2030.
What’s Ahead?
Analysts say OEM investments signal a structural shift from BS-VI compliance toward electric mobility, with Deloitte estimating that about 80% of automaker capital expenditure in India over the next three years will be directed at EV expansion.
“The year 2026 will mark the advent of multiple gigafactories entering production, taking total capacity to 100 GWh from the current 60 GWh,” Rajat Mahajan, partner and automotive sector leader, Deloitte India, told The Core.
Indian energy conglomerates are planning to expand capacity, while Indian conglomerates with automotive interests are partnering with global players or going solo. Foreign OEMs are also pursuing backward integration with traditional Indian battery manufacturers.
To tackle range anxiety and charging concerns, automakers are also bundling EV launches with ecosystem investments. Tata Motors leveraged the Tata UniEVerse—covering Tata Power, Tata Chemicals, TCS and Tata AutoComp—to bolster charging, software, financing and supply chains. Rivals including Maruti Suzuki, Hyundai and VinFast are following suit, investing in battery localisation, charging networks and resale support.
Big Bets, Bumpy Road
Tata Motors entered India’s electric passenger car market with the extended-range Tigor EV for personal buyers in October 2019, followed by the Nexon EV in January 2020 and the Tiago EV in September 2022, building its mass-market EV portfolio. Other OEMs soon followed.
Now, as early consumers look to upgrade, resale-value concerns are mounting. While JSW MG and Maruti Suzuki have announced buyback schemes, early adopters remain exposed, underscoring uncertainties in India’s nascent used-EV market.
Even in motor claims, petrol (68%) & diesel (25%) vehicles dominate, jointly accounting for 93% of the total share. EVs, despite a minimal claim volume (1%), carry the highest claim frequency (29%) and steepest severity (repair cost at an average of Rs 39,021).
“Compact cars and SUVs continue to dominate with three-quarters of total claims, while electric vehicles—though still just 1% of volumes—show the sharpest frequency and the highest repair costs due to battery and electronics-related damage,” Paras Pasricha, Head- Motor Insurance, Policybazaar, said.
Data from the Ministry of Power shows that India had 29,277 public electric vehicle charging stations nationwide as of August 2025. However, consumers report that many oil marketing companies (OMC) installed points remain non-functional.
Global Playbook
Industry watchers say India can draw lessons from global peers that used policy to decisively tilt demand toward electric mobility. China’s long-running new energy vehicle (NEV) push, backed by sustained state support, reshaped its domestic market before manufacturers expanded overseas. Norway accelerated adoption by heavily taxing ICE vehicles relative to EVs, while London’s zero-emission vehicle (ZEV) framework shows how regulation can force demand shifts. In contrast, the US and EU are now leaning on hybrids as EV sales growth slows.
Globally, lithium-ion battery pack prices have fallen 8% since 2024 to a record low of $108 per kilowatt-hour, according to BloombergNEF. The decline was driven by excess cell manufacturing capacity, fierce competition and a continued shift toward cheaper lithium iron phosphate batteries, offsetting higher battery metal costs, BNEF’s 2025 Lithium-Ion Battery Price Survey showed.
Momentum Meets Limits
Driven by the cost of economics, electric two-wheelers have been one of the fastest growing segments and are gaining momentum, recording 16.4% year-on-year growth in the first half of FY26, with EV penetration among two-wheelers now at 6.3%.
Kerala led EV penetration during April–October FY26 at 13.9%, more than double the national average, aided by higher awareness and improving infrastructure. Karnataka followed at 12.5%, maintaining steady growth backed by OEM presence and strong urban demand.
However, month-on-month demand momentum stalled through the year. Analysts flag deeper market challenges, citing persistent hurdles ranging from affordability and limited model availability to range anxiety, patchy charging infrastructure and constrained financing, all of which continue to slow mass adoption.
The market landscape has also shifted. Until last year, Ola Electric was the clear leader, with legacy automakers yet to gain traction in the nascent segment. After a spate of customer complaints, strategic missteps and after-sales challenges, Ola has been overtaken by incumbents such as TVS Motor and Bajaj Auto, which are now locked in a close fight for the top spot.
Electric Motorcycles– An Emerging Area
TVS Motor said at its quarterly earnings call that customers now have a clearer understanding of EVs’ total cost of ownership, a shift expected to boost adoption and gradually push demand beyond cities into rural markets.
With EV offerings heavily skewed toward scooters—an urban staple rather than the preferred rural motorcycle—electric two-wheeler adoption has remained largely city-centric. Scooters account for about 98.5% of electric two-wheeler sales, while electric motorcycles, with under 2% share, are limited to a handful of OEMs and a niche set of urban riders.
“In rural areas, motorcycles are considered a viable alternative to scooters for long journeys on rugged roads, yet the limited range of electric motorcycles and inadequate charging infrastructure mean growth is slower than expected. However, in a motorcycle-driven country, the segment has potential—especially with legacy players entering to drive disruption,” Mahajan said.
Eicher Motors-owned Royal Enfield will be the first major OEM to enter India’s electric motorcycle market, launching its Flying Flea series by the end of FY26. India Yamaha Motor is also set to debut battery-powered models—the AEROX-E and EC-06—after completing network readiness in Q4 FY26. Currently, the segment is limited to a handful of startups, including Revolt, Ultraviolette, Oben Electric, Matter and River.
Ride is Rough
For FY2026, Rohan Kanwar Gupta, Vice President & Sector Head, Corporate Ratings at ICRA Limited, estimates EV penetration at 4–5% in passenger vehicles and 6–7% in two-wheelers.
Anurag Singh, advisor at Primus Partners, pointed out that challenges in sourcing rare-earth magnets and battery materials, supply constraints continue.
Meanwhile, the uncertainty created by regulations and the absence of cohesive long-term policies in certain states causes consumers to hesitate to invest in EVs. Disposing of and recycling of batteries are an upcoming issue that needs to be managed to minimise its environmental effects.
Awareness around EV safety is also limited, as consumers complain most residential welfare associations (RWAs) are reluctant to install chargers, citing the absence of government mandates or clear installation guidelines.
Battery architecture has also emerged as a key constraint for electric two-wheelers. Despite years of debate around swapping and battery-as-a-service (BaaS), most electric two-wheelers in India still rely on fixed batteries, limiting use cases. Without dependable home or shared charging options, the segment remains largely urban-focused and inaccessible to wider markets.
