India’s EV Market Resets Post-Subsidy; BNP Paribas Sees Strong Structural Growth Ahead

India’s electric vehicle market is entering a phase of recalibration. The revision of subsidies under the PM E-DRIVE scheme in FY26 — slashed from Rs. 5,000/kWh (capped at Rs. 10,000/vehicle) to Rs. 2,500/kWh (capped at Rs. 5,000/vehicle) — has prompted a short-term correction, particularly in the electric two-wheeler (E2W) segment. However, the broader trend suggests a maturing market, with consumer demand and OEM strategies evolving to reflect new cost realities.

“The halving of PM E-DRIVE subsidies has shaken the electric two-wheeler market,” said Kumar Rakesh, Research Analyst, BNP Paribas Securities India, “but the 40% year-on-year growth shows that consumer demand for EVs remains robust despite short-term affordability challenges.”

Key Takeaways:
• 30% MoM decline in E2W sales in April 2025
• 40% YoY growth in E2Ws still intact
• 60% YoY growth in EPVs; penetration steady at 3%
• E3W penetration rises to 61.8%; 5% MoM growth
• Regional divergence widens: Kerala, UP lead; Bihar, Maharashtra lag

The E2W segment, most sensitive to upfront cost changes, saw market penetration fall to 5.4% in April, down from 8.6% in March. State-level impact varied — Maharashtra recorded the steepest decline, dropping from 16.4% to 8.0%. Kerala, with stronger state-level support, sustained the highest penetration at 16.7%, while Bihar remained at the bottom at 1.7%.

Despite the drop, OEM performance showed resilience. TVS Motor retained the top spot with a 21.6% share. Ola Electric recovered strongly, gaining 591 basis points to reach 21.5% after resolving registration backlogs. Bajaj Auto lost 658 basis points, falling to 20.8% amid pricing pressures. Ather Energy and Hero MotoCorp made incremental gains, reaching 14.4% and 6.7%, respectively.

“Ola Electric’s sharp market share gain in April underscores its ability to overcome operational hurdles swiftly,” noted Rakesh.

In contrast, the electric passenger vehicle (EPV) and three-wheeler (E3W) segments proved more stable. EPV sales grew 60% year-on-year, with penetration holding steady at 3%. Mahindra & Mahindra gained 833 basis points to 24.4%, buoyed by strong demand for the newly launched XEV 9e and BE 6e. Tata Motors remained the segment leader at 36.2% despite a minor share dip, while MG Motor fell to 28.4%.

“Mahindra’s aggressive push into battery electric vehicles, coupled with its leadership in three-wheelers, makes it a standout in India’s EV landscape,” said Rakesh.

The E3W segment, used heavily for commercial transport and logistics, saw both monthly and annual growth — up 5% month-on-month and 47% year-on-year. Penetration rose from 59.3% in March to 61.8% in April. Uttar Pradesh led the category with 87% penetration, while Kerala posted the sharpest MoM improvement. Mahindra and Bajaj Auto retained their lead with 9.1% and 8.9% shares, respectively.

“The steady 3% penetration in passenger vehicles and the 61.8% in three-wheelers highlight the diverse strengths propelling India’s electrification forward,” Rakesh added.

The report also highlights persistent regional disparities. States like Kerala, Karnataka, and Uttar Pradesh are outperforming in EV adoption thanks to policy support and infrastructure availability. In contrast, Maharashtra’s recent decline in the E3W and EPV segments points to inconsistent execution, while states like Bihar and West Bengal continue to lag across the board.

“Kerala and Uttar Pradesh are setting the pace for EV adoption, but laggard states like Maharashtra and Bihar need stronger infrastructure and incentives to close the gap,” Rakesh said.

Looking Ahead
The market is expected to stabilise as consumers adjust and OEMs revise their pricing structures. New launches — including Maruti Suzuki’s e-Vitara, Tata Harrier EV, and Sierra EV — could boost demand in the second half of the year. However, the rise of hybrid vehicles could create headwinds for pure battery electric vehicles (BEVs) in segments where charging infrastructure remains limited.

“With a robust pipeline of launches, 2025 will be pivotal, though hybrids may challenge pure EV growth,” Rakesh noted.

Among listed players, Mahindra & Mahindra is expected to benefit the most. Rated “Outperform” by BNP Paribas with a target price of ₹3,600, Mahindra’s execution in UVs, EVs, and light commercial vehicles positions it strongly for FY26. The company’s pipeline includes three ICE SUVs, two BEVs, and two LCVs, underscoring its multi-pronged growth strategy.

“The lumpiness in two-wheeler volumes due to subsidy reductions is temporary; the market will stabilise as OEMs recalibrate pricing and consumers adapt,” concluded Rakesh.

India’s EV market, while adjusting to reduced incentives, continues to reflect strong underlying momentum. The April correction is less a reversal and more a market reset — one that could usher in a more sustainable, product-led growth phase.