The Indian electric vehicle (EV) market exhibited mixed performance in April 2025, with notable impacts arising from the reduction in subsidies under the PM E-Drive scheme, according to a recent report by BNP Paribas Exane.

The report, titled 'EVolution: Lowered Incentive Impact on 2W Electrification', identifies a decline in two-wheeler (E2W) electrification, steady passenger vehicle (EPV) penetration, and an increase in three-wheeler (E3W) volumes.

Two-wheeler EVs: impact of subsidy reductions

The E2W segment experienced a significant decline in April 2025, with sales volumes dropping by approximately 30% month-on-month (m-m), and penetration decreasing to 5.4%, down from 8.6% in March 2025.

This downturn was primarily driven by a reduction in PM E-Drive subsidies, which decreased from Rs. 5,000/kWh (US$ 60) (capped at Rs. 10,000 per vehicle) in FY25 to Rs. 2,500/kWh (capped at Rs. 5,000 per vehicle) in FY26.

Despite the month-on-month decline, E2W volumes increased by approximately 40% year-on-year (y-y), due to a low base.

- Market share shifts: Ola Electric saw a recovery, gaining 591 basis points (bps) m-m to reach a 21.5% market share, nearly matching TVS Motor (TVSL) at 21.6%. Bajaj Auto (BJAUT) lost the most ground, with its share dropping 658 bps to 20.8%. Hero MotoCorp (HMCL) and Ather Energy gained 151 bps and 108 bps, reaching 6.7% and 14.4%, respectively.

- Regional trends: E2W penetration declined across various states, with Maharashtra experiencing the most significant drop (from 16.4% to 8.0%). Bihar saw the least decline, with a drop of 1 percentage point to 1.7%. Kerala recorded the highest penetration at 16.7% for April 2025. The report suggests that E2W volumes will stabilise in the coming months as the market adjusts to the reduced subsidies.

Passenger vehicle EVs: steady growth

Electric passenger vehicle (EPV) sales saw a 60% year-on-year increase, although they moderated by 5% month-on-month.

Penetration remained steady at 3% in April 2025. Mahindra & Mahindra (M&M) recorded a notable performance, supported by its recently launched battery electric vehicles (BEVs), the XEV 9e and BE 6e.

- Market leaders: M&M gained 833 bps m-m, reaching a 24.4% market share. Tata Motors (TTMT) maintained its lead with a 36.2% share, despite a loss of 140 bps. MG Motor saw the largest decline, dropping 331 bps to 28.4%.

- Upcoming launches: The report mentions a strong pipeline for 2025, including Tata Motors' Harrier EV and Sierra EV, M&M's XUV.e5, and Maruti Suzuki's e-Vitara. These launches are expected to support EV adoption, although hybrid models may see increased demand in the coming quarters.

- State performance: Gujarat experienced the greatest improvement in EPV penetration, while Delhi saw the largest decline. Kerala led with a 6.9% penetration rate in April 2025. The report highlights 2025 as an important year for EPV adoption, with new launches expected to stimulate market growth.

Three-wheeler EVs: ongoing growth

The E3W segment showed continued growth, with volumes rising by 47% year-on-year and 5% month-on-month. Penetration increased to 61.8%, up from 59.3% in March 2025, reflecting growing acceptance of electric three-wheelers.

- Market dynamics: M&M retained its leadership position with a 9.1% share, despite a loss of 220 bps month-on-month. Bajaj Auto followed closely with an 8.9% share, down 5 bps. The E3W market remains fragmented, with several players competing for market share.

- Regional insights: Kerala recorded the most significant month-on-month increase in E3W penetration, while Maharashtra saw the largest decline. Uttar Pradesh led overall with an 87.0% penetration rate in April 2025.

Mahindra & Mahindra: investment outlook

The report provides an investment analysis of Mahindra & Mahindra, rating the company as "Outperform" with a target price of Rs. 3,600. M&M's success in utility vehicles (UVs) and tractors, alongside its EV strategy, positions it for continued growth.

- Investment case: M&M's recent launches, including the XUV3XO, Thar Roxx, XEV 9e, and BE 6, are expected to contribute to double-digit volume growth in FY26. Planned launches in CY26, including three internal combustion engine (ICE) SUVs, two BEVs, and two light commercial vehicles (LCVs), are set to maintain this momentum. The company's tractor segment is also expanding, and the potential listing of its auto and farm businesses could unlock value.

- Risks: Upside risks include a recovery in tractor demand and faster production ramp-up. Downside risks include potential market share losses in UVs, competitive pressure in LCVs, emission regulations, and commodity inflation.

Conclusion

The reduction in PM E-Drive subsidies has created short-term challenges, particularly for E2Ws, but the report indicates that the market will adjust. The subsidy cuts affect all segments, with E3Ws and e-rickshaws also seeing reduced incentives (from Rs. 5,000/kWh to Rs. 2,500/kWh, capped at Rs. 25,000 per vehicle).

Despite these challenges, the Indian EV market is expected to continue growing, driven by new model launches and increasing consumer acceptance.