EV Adoption Remains Slow In India As Price Difference With ICE Vehicles Remains Huge

Despite the growing interest in eco-friendly mobility, the higher upfront cost of EVs has discouraged many buyers, and posed a challenge to the government's efforts to promote clean transportation.

The steep cost of lithium-ion batteries plays a major role in keeping EV prices elevated.

Source : Freepik

While the world gradually moves towards eco-friendly solutions across industries, the significantly higher price difference between electric vehicles (EVs) and internal combustion engine (ICE) vehicles has slowed down the adoption of EVs in India. 

Despite the growing interest in eco-friendly mobility, the higher upfront cost of EVs has discouraged many buyers, and posed a challenge to the government's efforts to promote clean transportation and reduce urban pollution.

The average cost of an electric car stands at Rs 17.89 lakh, whereas petrol and diesel-powered vehicles are priced at around Rs 12.77 lakh, reported The Economic Times.

This translates to a price gap exceeding 40 per cent, which has deterred potential consumers. As a result, EV penetration in India's passenger vehicle segment remains low, accounting for only 2.62 per cent of the market.

At the recent Convergence India and 10th Smart Cities India Expo, Road Transport and Highways Minister Nitin Gadkari expressed optimism, and stated that EVs would soon reach price parity with petrol vehicles. He suggested that this could happen within the next six months, bringing relief to prospective buyers.

Battery Costs and Market Trends

The steep cost of lithium-ion batteries plays a major role in keeping EV prices elevated. These batteries account for a significant portion of an EV's cost and are primarily imported. They are also subject to high tariffs due to limited domestic production.

However, industry experts anticipate a gradual price decline. "As battery costs continue to fall and domestic production ramps up, EV prices will gradually decrease, narrowing the price gap with ICE vehicles," the report said quoting a senior official at a New Delhi-based carmaker.

Globally, China remains the dominant player in the EV sector, accounting for more than 60 per cent of the market. In 2024, Chinese EV sales reached 6.3 million units, reflecting a 27.5 per cent annual increase. Aggressive price competition in China led to a 6.6 per cent drop in average EV prices, bringing them down to $23,618.

India's EV market, though much smaller, shows growth. Sales reached 113,530 units in 2024, marking an 18.4 per cent rise. However, the price reduction in India remained relatively modest, with average EV prices declining by only 3.3 per cent to $21,370. Compared to China, the pace of price cuts in India remains sluggish.

However, industry trends pointed towards steady progress, the report noted. "What's encouraging is the consistent growth in the number of BEV (battery electric vehicle) models available in the market, which has nearly doubled from 19 models in 2022 to 36 models in 2024. This increased variety gives consumers more options across different price points," said Ravi Bhatia, president, Jato Dynamics.

Notably, Tata Motors retained its position as India's leading EV manufacturer. However, rising competition from new entrants has put pressure on its market share. The intensifying competition is expected to drive innovation and bring down costs, making EVs more accessible.