The momentum for battery electric vehicles (EVs) in India's two-wheeler and passenger car segments slowed down in 2025. This shift followed a key policy change: the reduction in Goods and Services Tax (GST) rates for petrol and diesel vehicles starting October 2024. While electric vehicle volumes continued to grow healthily for the full year, their market share faced pressure in the final quarter.
The GST Effect: Narrowing Price Gap Dents EV Share
The government's decision to lower GST on conventional internal combustion engine (ICE) vehicles made them more affordable relative to their electric counterparts. This narrowed price gap triggered a significant spike in sales of petrol and diesel vehicles during the December 2025 quarter. Consequently, the market share growth that EVs had seen earlier in the year was weighed down.
The data reveals a clear pattern: In the two-wheeler segment, EV penetration climbed from 6% in 2024 to a peak of 8.1% in the January-September period of 2025. However, the weaker performance in the post-GST-cut quarter pulled the overall penetration for the full year down to 6.3%.
A similar story unfolded in the passenger vehicle (PV) segment, which includes cars and SUVs. Excluding hybrid models, EV penetration improved from 2.5% in 2024 to nearly 4% for the entirety of 2025. Yet, the growth trajectory was impacted by the renewed competitiveness of ICE vehicles post-October.
Three-Wheelers Defy the Trend, Post Sharp Growth
Amidst the slowdown in two-wheelers and cars, the three-wheeler (3W) segment emerged as a standout performer. This category, excluding e-rickshaws, recorded a sharp improvement in electric adoption. Penetration levels jumped from 12% in 2024 to an impressive 18% in 2025, showcasing robust demand for commercial electric three-wheelers.
Robust Volume Growth Despite Share Pressure
It is crucial to note that despite the pressure on market share penetration, absolute sales growth for electric vehicles remained strong across all segments. According to the latest Vahan registration data, total registrations of battery-powered EVs rose by 16% year-on-year to 22.7 lakh units in 2025, up from 19.5 lakh units in 2024.
The electric two-wheeler segment, despite its share challenges, saw volumes increase by 11% to 12.8 lakh units from 11.5 lakh units a year earlier.
The passenger vehicle segment delivered the most explosive growth. Registrations for electric cars and SUVs (excluding hybrids) surged by a remarkable 77% to 1.8 lakh units in 2025, compared to about 99,500 units in 2024. This surge was fueled by aggressive expansion plans from existing manufacturers and the entry of several new players into the market.
Electric three-wheeler volumes also grew healthily by 15% year-on-year to 8 lakh units, up from 6.9 lakh units in 2024. Within this segment, e-rickshaws continued to dominate, accounting for approximately 70% of total E3W sales during the year.
The year 2025 presented a nuanced picture for India's electric vehicle transition. While policy support for ICE vehicles temporarily altered the competitive landscape, the underlying growth in EV adoption, particularly in three-wheelers and passenger vehicles, indicates a market that is evolving on multiple fronts.
