Indians drive on petrol and diesel; park EV plans after GST cut

The share of battery electric vehicles in the Indian two-wheeler and passenger car market has declined in 2025 after the government reduced GST rates on petrol and diesel vehicles from October, even as electric vehicle sales continued to grow during the year, according to a report by The Times of India.The tax cut widened the price difference between combustion engine vehicles and electric models, making petrol and diesel vehicles more attractive to buyers. This resulted in a sharp jump in ICE vehicle sales during the December quarter, causing EV market share to decline across segments. The three-wheeler category stood out from this trend as electric vehicle penetration improved over the year.

Also read: Tax cuts and tariff cuts will boost car sales to a record 4.5 million by 2025

In the two-wheeler market, the share of battery-powered vehicles rose from 6% in 2024 to a high of 8.1% between January and September 2025. However, the December quarter – the first full quarter after the VAT cut – saw a decline in the share of EVs. As a result, overall electric two-wheeler penetration fell to 6.3% for the year.Passenger vehicles followed a similar trajectory. Electric vehicle penetration, excluding hybrid models and including cars and SUVs, increased from 2.5% in 2024 to almost 4% in 2025. The three-wheeler segment showed a much sharper improvement. The penetration of electric three-wheelers, excluding e-rickshaws, has increased from 12% in 2024 to 18% in 2025.

Even as penetration declined in some segments, electric vehicle volumes continued to grow. Total registrations of battery-powered electric vehicles – including two-wheelers, three-wheelers, cars and SUVs – rose 16% year-on-year to 22.7 lakh units in 2025, compared to 19.5 lakh units in 2024, according to Vahan data.

Registrations of electric two-wheelers rose 11% to 12.8 lakh units in 2025, compared to 11.5 lakh units the previous year. The strongest growth came from electric passenger cars, with the exception of hybrids, where registrations rose 77% to 1.8 lakh units, from around 99,500 units in 2024. This growth was driven by increased model availability, expansion by existing manufacturers and entry of new players.

The volume of electric three-wheelers grew 15% year-on-year to 8 lakh units in 2025, from 6.9 lakh units in 2024. E-rickshaws accounted for almost 70% of the total electric three-wheeler sales during the year.

To counter slowing demand after the GST cut, automakers such as Mahindra & Mahindra, Tata Motors, Hyundai and Kia introduced record year-end discounts on electric vehicles.

While EV penetration showed signs of pressure, the broader passenger car market delivered strong performance. Car sales rose by around 6% year-on-year in 2025, despite a high base, to a record 4.5 million units. Growth was supported by tax rationalization measures and cuts in repo rates by the Centre, boosting disposable incomes.

Passenger car sales were up 4.2% in calendar year 2024 and 8.2% in 2023.

According to industry estimates, about 405,000 to 407,000 cars, sedans and commercial vehicles were sold in December, an increase of about 26% from the 322,000 units sold in the same month of 2024. This was the third consecutive month of double-digit growth after the VAT cut, which came into effect on September 22, 2025.