As India closes out 2025, the electric passenger vehicle sector stands at an inflection point, triggered by global entries and record demand, yet wrestling with structural challenges that have tempered the full-scale breakout the industry had hoped for.
05 Dec 2025 | 3150 Views | By Prerna Lidhoo
The year 2025 was supposed to be the year India’s electric passenger vehicle market hit full stride, a year packed with long-promised launches, rapid scale-up and a shift from early adoption to mainstream demand. While the year began with two global EV giants, Tesla and VinFast, finally entering the Indian ...
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The year 2025 was supposed to be the year India’s electric passenger vehicle market hit full stride, a year packed with long-promised launches, rapid scale-up and a shift from early adoption to mainstream demand. While the year began with two global EV giants, Tesla and VinFast, finally entering the Indian market and Mahindra scaling up, overall EV car penetration remained low at around 4-5%.
This limited adoption, despite new model availability, is largely attributed to persistent challenges such as the high initial purchase cost compared to traditional internal combustion engine (ICE) vehicles and insufficient public charging infrastructure, which leads to widespread consumer range anxiety. Adding to that were issues related to supply-chain disruptions, policy uncertainty, cautious consumer sentiment and delayed product rollouts.
India’s largest carmaker Maruti Suzuki’s first EV offering, the e-Vitara, faced several significant delays in the Indian market, primarily due to global supply chain disruptions and a strategic decision to prioritize international markets. A critical bottleneck has been a shortage of essential components, particularly rare earth magnets like neodymium. These supply issues, exacerbated by export restrictions from China created a domino effect, pushing back the production timeline and, consequently, the domestic launch.
Yet, the numbers continue to reflect undeniable growth potential. In the first half of FY26 (April–September 2025), EV passenger vehicle sales almost doubled, up 108% year-on-year, but on a low base. As India closes out 2025, the EV sector stands at an inflection point, triggered by global entries and record demand, yet wrestling with structural challenges that have tempered the full-scale breakout the industry had hoped for.
New Launches Fueling the Momentum
If there was one theme that defined India’s EV landscape this year, it was the sheer surge of new launches and the momentum they unlocked. The most symbolic moment for the industry came from the long-anticipated arrival of Tesla and VinFast. Their presence injected a fresh spark into the market’s imagination. The numbers may be small—Tesla with 118 registrations on Vahan in 2025, VinFast with 204 vehicles—but the signal was anything but.
Their entry marked a turning point, suggesting that India has finally matured into a commercially attractive, strategically important EV destination for high-profile global manufacturers. Similarly, BYD, the Chinese automaker, crossed 10,000 deliveries in India as of September 2025, staring from late 2021. It now has a network now spanning over 44 dealerships and a portfolio anchored by the Atto 3 SUV, Seal sedan, and e6 MPV.
Tata Motors, the brand that almost single-handedly kickstarted India’s mass-market EV revolution, saw its once-unshakable dominance soften. Its market share slid from a commanding 64% last year to nearly 40% in H1 FY26. On the surface, Tata had little reason to worry: its 10-month sales data underlines steady growth, with total wholesales reaching 66,308 units, an increase of 14% over the 58,216 units recorded in January–October 2024.
It continued to lead the pack with the Punch, Nexon, Curvv, Harrier, Tiago, and Tigor EVs now in play and the Harrier EV strengthening monthly volumes since July. But in an industry where momentum can shift overnight, it wasn't so much about Tata Motors slowing down as it was about everyone else speeding up and at a pace few had anticipated.
JSW MG Motor India emerged as the most formidable challenger, firmly claiming the number-two position with nearly 29% market share. The boost came from the Windsor EV and the company’s innovative Battery-as-a-Service model, which lowered the entry price for many buyers.
Its range now spans the Comet and ZS EV at the mass end and stretches into premium territory with the M9 MPV and Cyberster roadster, retailed via the MG Select network to keep higher-end customers differentiated from the core line-up. As MD Anurag Mehrotra said, “EVs now account for 80% of the company’s sales as it sees strong traction across segments EVs are expected to cross 7% industry market share by this year-end.”
Mahindra & Mahindra wasn’t far behind, riding the success of its new EV portfolio to secure 21% share. Its “Born Electric” series—BE 6 and XEV 9e—alongside the XUV 3XO EV gave it newfound heft. Together, these two players mounted the strongest challenge Tata has faced in the EV space, powered by aggressive product rollouts, sharper pricing and streamlined supply chains that helped them scale faster than ever. Hyundai, too, entered the hotly contested mid-size SUV segment with the Creta Electric in January 2025. Despite large percentage gains, it has so far seen a relatively muted response compared to its ICE counterpart.
Two Setbacks That Slowed the Surge
For an industry that entered 2025 with soaring expectations, the year turned out to be unexpectedly turbulent. Even as new launches, rising consumer awareness, and better charging access primed the market for scale, two major disruptions, the GST 2.0 realignment and China’s rare-earth export restrictions, combined to stall momentum just when EVs were poised to break out.
After GST 2.0, while EVs continued to attract the preferential 5% GST, the surprise cuts on conventional vehicles altered the math for many buyers. The revised slab lowered the GST on internal combustion engine vehicles from 28% to 18%, while hybrids over 4 metres saw rates drop from 43% to 40%. For the mass market, this narrowing of the price gap had immediate consequences.
The data is telling. EV sales had peaked in August 2025 with a record 18,369 units, but by September, volumes slipped 14% to 15,771 units. Industry experts were clear that “recent GST adjustments favoring conventional and hybrid vehicles” were the primary reason for the decline. From 5.9% in August, penetration fell to 3.2% in October, even though the annual rate has still doubled from 2% last year to 5% by the year end. EVs remain on track for a strong year as total volumes are projected to touch 1,75,000 units by March 2026. But GST 2.0 ensured that the breakout moment didn’t fully mature.
Layered on top of shifting tax dynamics was a supply-side crisis of global consequence. China’s restrictions on exporting rare earth magnet materials, critical for EV motors and batteries, threatened to slow India’s transition at the component level.
India Ratings and Research warned that this move “could delay electric vehicle penetration in India,” even if the immediate impact on total automotive volumes remains contained due to India’s still-low EV adoption. Rare earth magnets account for 30% of EV motor costs, making the sector disproportionately vulnerable. Many manufacturers explored importing fully assembled components instead of individual rare earth elements, raising working capital and production costs.
The twin pressures of GST 2.0 and the rare-earth restrictions meant that 2025 became a year of recalibration rather than runaway growth. EV penetration did not expand as rapidly as projected, even though underlying demand remained strong.
Carmakers insist the long-term story remains intact. Tata Motors, which leads India’s EV market, reiterated confidence in the long view aiming for more than 30% EV penetration by 2030.
"Subsidy dependence can go down once there's 15-20% EV penetration. EV adoption will increasingly be driven by scale, technology, and cost efficiencies not incentives alone. With penetration in the passenger car segment at 2.5% in 2024, there is still ample room to grow,” Tata Motors MD Shailesh Chandra said. The question now is whether the industry can navigate these systemic headwinds quickly enough to unlock the next phase of India’s electric transition.
The Big Trends to Watch in 2026
If 2025 made one thing clear, it’s this: India’s next wave of EV growth is being shaped at the top end of the market. Demand for premium EVs priced above ₹20 lakh is rising rapidly as buyers prioritise longer ranges, advanced tech, and stronger safety features to counter the ever-present concern of range anxiety. But premium enthusiasm alone cannot carry the industry into its next phase. For real, broad-based growth to kick in, one critical foundation still needs strengthening: India’s public charging ecosystem.
Consumers today continue to face “range anxiety” while buying EVs due to fewer public charging points. The lack of adequate infrastructure keeps EVs skewed heavily toward high-net-worth buyers, who typically have access to private charging at home or office. Public charging, though improving, is still far from where it needs to be.
NITI Aayog notes that India currently has 14 cars per charging station. Yet, the fact remains that most of these stations are either inaccessible or underutilised hence it becomes difficult for charge point operators like Chargezone and Zeon to further invest in charging infrastructure.
The good news is that progress is underway. India’s public EV charging infrastructure has expanded fourfold from 2023 to mid-2025, reaching 24,000 stations across highways and cities, according to the India Charging Report 2025 by TATA.ev. The study shows that 65% of the country’s pin codes now have at least one registered electric vehicle, and 84% of EV owners in 2025 use them as their primary mode of transport, up from 74% in 2023.
Luxury carmakers have already begun riding this wave with over 12% penetration of EVs. Santosh Iyer, MD & CEO of Mercedes-Benz India, said “EVs are a key element in the company's decarbonisation roadmap… Our top-end battery electrics drive our strategy with the locally-produced EQS SUV recording its highest sales ever, accelerating our EV penetration to 8% of total volumes.”
This premium-led momentum is expected to continue in 2026, with more high-end models entering the market. At the same time, the next major unlock for mass adoption lies at the opposite end of the price spectrum. Identifying the path forward, Tata Motors’ Shailesh Chandra emphasized that cost reduction in entry-segment EVs will drive the next stage of expansion, an insight that aligns perfectly with India’s highly price-sensitive automotive market, where affordability remains the deciding factor for millions of potential buyers.
Together, these trends point to a dual-track future for India’s EV story: premium EVs setting the pace at the top and cost-optimized models and charging expansion determining how fast the rest of the country comes along.