The exit of subsidies and the entry of road taxes across key states threaten a double whammy for electric vehicle (EV) manufacturers, at a time when global energy shocks prompt many buyers to seek cleaner vehicles.
Maharashtra, Uttar Pradesh, Rajasthan and Tamil Nadu, which together accounted for a third of all EV sales, have ended EV subsidies after achieving targets, raising overall purchase costs. To be sure, all of them still offer exemptions on road and registration taxes. Meanwhile, Karnataka and Madhya Pradesh have introduced 4-10% road taxes on EVs.
The expiry of these subsidies is expected to have a direct impact on the EV industry, which had a blockbuster FY26 (fiscal year 2026) when sales surged 84% to nearly 200,000 units, as per data from the Federation of Automobile Dealers Associations (Fada).
State sops
Maharashtra’s 2025 policy offered a 10% subsidy for the first 10,000 electric cars, while Uttar Pradesh has been offering a 15% subsidy for up to 25,000 vehicles since 2022. Both subsidies were capped at ₹1 lakh. Since 2023, Tamil Nadu has offered commercial EVs ₹10,000 per kilowatt-hour (kWh) and up to ₹1.5 lakh for 3,000 cars annually. Rajasthan gave direct subsidies of ₹30,000-50,000 for the first 1,000 personal and 1,000 commercial electric cars. All of the subsidies have come to an end after the states achieved their sales targets.
Together, these four markets accounted for more than 80,000 electric car sales in FY26—representing more than a third of the 200,000 units sold nationwide. EVs comprised 4.3% of overall passenger vehicle sales in FY26.
Uttar Pradesh’s transport department said the government had received 24,952 applications for the subsidy by the end of March. “Subsidies amounting to ₹173 crore have been disbursed for 18,359 vehicles. For 4,433 vehicles, verification work has been done and the subsidy amount will be disbursed once received. For 2,160 vehicles, subsidy applications have been received, but verification remains pending due to some issues with the details,” the department said in an email.
Subsidy end
At least two dealers in Uttar Pradesh said the limit of 25,000 had been crossed and new customers were not receiving subsidies. On whether the policy would be extended to give more buyers the subsidy benefit, the transport department declined to comment and said the policy decision would be taken by state industrial development department. The department did not immediately respond to Mint’s queries.
Queries sent to the governments of Karnataka, Madhya Pradesh, Tamil Nadu, Maharashtra and Rajasthan remained unanswered. Maruti Suzuki, Mahindra and Mahindra and Hyundai Motor did not respond to Mint’s requests for comment.
Electric cars are typically ₹2-4 lakh more expensive than combustion engine vehicles. Experts warn that losing state-level support could stall EV adoption, noting that the subsidy exhaustion reflected a massive surge in demand as buyers rushed to secure incentives.
“Subsidies for electric cars under various state EV policies have been limited, largely due to equity considerations, and many of these funds have already been exhausted,” said Amit Bhatt, India managing director at International Council on Clean Transportation.
'Setback for green mobility'
“While states do offer incentives such as registration fee waivers, many are now revisiting these provisions, which could set back the green transition in mobility as upfront costs for EVs remain higher. What’s needed instead are stronger supply-side regulations, such as more stringent CAFE (corporate average fuel economy) standards and a ZEV (zero-emission vehicle) sales mandate,” he added.
A spokesperson for Tata Motors Passenger Vehicles said, “Electric mobility is a strategic imperative for India—integral to energy security, emissions reduction and economic competitiveness. Today, EV penetration in the highly price‑sensitive sub- ₹12 lakh segment, which accounts for nearly 65% of passenger vehicle volumes, is less than 2%, well short of the 15–20% threshold typically needed for sustained mass adoption.”
“While the central government enablers such as rationalized GST (goods and services tax) and PLI (production linked incentive) schemes are catalyzing localization, scale and manufacturing capability, continuity and predictability of customer-centric state‑level incentives, particularly for this mass segment, are equally vital for mainstreaming of EVs,” the spokesperson added.
“State‑level incentives remain a critical driver of EV adoption in India and will continue to play an essential role until penetration reaches 20-25%. To achieve the Government of India’s ambitious target of 30% EV penetration by 2030, sustained support from states will be vital in accelerating adoption across diverse markets,” Anurag Mehrotra, managing director at JSW MG Motor India, said. “Continued government support has been instrumental in sustaining adoption, but to accelerate growth further, it is essential to maintain a stable and conducive rate structure,” he added.
Carmakers' letter to Karnataka govt
With subsidies ending and some states imposing taxes, carmakers have begun expressing concern publicly. In a letter to the Karnataka government sent earlier this month, electric carmakers including JSW MG Motor, Tata Motors, and Hyundai wrote, “While we fully appreciate the state’s fiscal considerations, we would like to submit that policy signals of this nature may have a bearing on the reduction in air pollution, crude oil import and energy security, consumer sentiment and investment outlook, particularly at a time when the EV ecosystem is at a critical growth juncture.”
An industry executive, speaking on the condition of anonymity, noted that the withdrawal of state support was bad news as it created a headwind just when the push for electrification was expected to gain momentum. “If we are trying to cut oil imports and boost electrification, more support will be needed as the exhaustion of incentives dampens consumer sentiment,” the executive said.