Concerns about a slowdown in India's electric vehicle (EV) transition, sparked by a festive-season dip after tax cuts on traditional cars, are being allayed by industry leaders. Automakers and dealers assert that the recent softness reflects short-term market volatility rather than a fundamental shift in consumer preference away from EVs.
EV Penetration Shows Resilient Recovery
Data released by the Federation of Automobile Dealers Association (Fada) on Tuesday, 8th January 2026, revealed a telling trend. After electric vehicle penetration in the passenger vehicle market fell from 5.14% in September to 3.26% in October, it staged a robust recovery to 3.75% in November and 3.94% in December. This dip had initially prompted fears that the government's decision to slash Goods and Services Tax (GST) on petrol and diesel cars was making internal combustion engine (ICE) vehicles more attractive, potentially derailing EV adoption.
The tax change, implemented in September, reduced GST on small petrol/diesel cars from 28% to 18%, and on larger ones from 45-50% to 40%. The tax rate for EVs remained favorably at 5%. This narrowed the upfront price gap, with EVs typically costing ₹2,00,000-4,00,000 more. However, the subsequent rebound in EV share indicates a more complex consumer calculation.
C.S. Vigneshwar, President of Fada, emphasized the enduring trend, stating, "Electric vehicle sales are here to stay." He highlighted that EV car penetration grew from 2.5% to nearly 4% over the course of 2025, underscoring a solid long-term growth trajectory.
Automakers Reiterate Confidence in EV Trajectory
Leading Indian automakers have firmly dismissed any alarm regarding the EV growth story. Tata Motors Passenger Vehicles Ltd and Mahindra & Mahindra Ltd have both reiterated their bullish outlook, a stance supported by the Fada chief.
In December, Shailesh Chandra, Managing Director and CEO of Tata Motors PV, provided a compelling perspective. He pointed out that while GST cuts provided a short-term boost to ICE vehicle sales, the EV industry's monthly volumes have more than doubled from about 7,500 units a year ago to fluctuating between 16,000 and 18,000 units currently. Chandra reiterated the company's projection of 15-20% EV penetration for the overall industry by 2030, stating that Tata Motors has already demonstrated the possibility of achieving over 15% penetration under present conditions.
Echoing this confidence, Rajesh Jejurikar, Executive Director and CEO of Mahindra & Mahindra, commented in November that the company had not seen any recalibration in EV sales post the GST cuts. He attributed the October sales spike for ICE vehicles to a pent-up demand of 30-40 days, which did not exist for EVs as buyers anticipated the tax change. Mahindra projects that up to 20-25% of its overall portfolio sales could come from EVs in the future.
Total Cost of Ownership Drives Consumer Choice
Experts suggest that the long-term impact of the GST cut on EV adoption will be limited. Anurag Singh, Advisor at Primus Partners, explains that Indian consumers are highly driven by the Total Cost of Ownership (TCO). Their purchase decisions quickly factor in not just the acquisition cost but also long-term savings on fuel, maintenance, depreciation, and insurance.
"Directionally, the EV value proposition is improving, and penetration continues to rise," Singh noted. He characterized the current adoption pace as "slower than earlier expectations, reflecting a more rational and cautious market rather than a reversal of the trend."
In absolute terms, the underlying growth remains strong. Electric passenger vehicle sales in India saw a significant 77% year-on-year growth, reaching 176,538 units in the calendar year 2025. While the government's target is 30% EV penetration by 2030, the industry's moderated expectation of 15-20% appears to be on a steady, if deliberate, path to realization.
