India’s electric vehicle revolution has a fundamental problem, and it has nothing to do with technology. The batteries are improving, the designs are maturing, and the policy intent is genuinely ambitious. Yet for the daily commuter in Bareilly or the smallholder farmer eyeing a two-wheeler in rural Bihar, the arithmetic simply does not add up. A post-subsidy electric scooter still costs ₹20,000–30,000 more than its petrol equivalent in the ₹1–1.5 lakh bracket that accounts for the overwhelming majority of India’s vehicle market. Until Budget 2026 addresses this gap with structural conviction — not piecemeal relief — the 30% EV penetration target by 2030 will remain precisely what skeptics have always suspected: an aspiration dressed up as a plan.
The Two-Wheeler Trap: Where India’s EV Story Is Won or Lost
India is not a car market that also sells two-wheelers. It is a two-wheeler market that occasionally sells cars, and any EV policy that loses sight of this distinction is doomed to irrelevance. Two-wheelers account for 95% of electric vehicle sales by volume, yet electric scooters have barely scratched 6–8% market share against a target of 25%, with rural penetration languishing under 2%. The reason is straightforward: the Ola S1 Pro, even after FAME subsidies, sits at roughly ₹1.33 lakh, whilst the Hero Splendor — the workhorse of India’s Tier-2 and Tier-3 towns — costs ₹1.05 lakh. For a household earning ₹15,000 a month, that ₹28,000 differential is not a marginal inconvenience; it is a month and a half of income.
Battery localisation through PLI covers only 20 GWh annually against an estimated need of 50 GWh, keeping cell costs roughly 30% above what a comparable ICE engine would cost. Sodium-ion chemistry, which could bring costs down to $70 per kWh against today’s $100, holds genuine promise — but scaled production awaits 2027 at the earliest. In the interim, a GST reduction from 28% on batteries to 5% in line with finished EVs could shave ₹15,000 off the purchase price immediately, a move manufacturers have pleaded for and policymakers have thus far resisted.
The Passenger Car Premium That Turns Away the Very Buyers EVs Need
If the two-wheeler gap is painful, the passenger car chasm is almost discouraging. The Tata Nexon EV, India’s most popular electric car and a genuine engineering achievement, is priced at approximately ₹14.48 lakh ex-showroom. Its petrol sibling sits at ₹9.85 lakh — a difference of nearly ₹4.63 lakh that no five-year total cost of ownership argument can bridge at the point of purchase for a salaried family stretching to buy their first car. The FAME-III benefit covers barely 10% of this gap, and with the scheme’s sunset approaching in April 2026, even that partial relief is uncertain.
Battery packs — constituting 40% of the bill of materials — persist at ₹3–4 lakh for a 40 kWh unit, inflated by 15% import duties and rupee volatility, despite global prices having fallen 40% to $100 per kWh. At the upper end, the MG ZS EV commands ₹22 lakh against ₹16 lakh for petrol rivals, deterring precisely the aspirational urban middle class that ought to be EV’s most natural constituency. The 40% total cost saving over five years is real, but it requires a buyer to absorb a large upfront shock — one that most Indian households, without affordable financing, simply cannot manage.
The Financing Void That No Subsidy Alone Can Fill
Subsidies address the sticker price. They do nothing about the loan. Urban banks cap EV loans at 50% loan-to-value ratios, citing first-year depreciation of 25% and uncertain resale values, whilst rural co-operatives and NBFCs that serve 60% of two-wheeler credit demand either avoid EV portfolios entirely or insist on cash purchases. Battery-as-a-Service models — where the battery is leased rather than owned, cutting upfront costs by 40% — offer a structural solution, but the swap station network stands at barely 5,000 against a minimum viable requirement of 50,000.
State policy incoherence worsens the picture: Delhi offers ₹30,000 in purchase rebates whilst Bihar offers nothing, creating a patchwork of incentives that confuses consumers and distorts markets in equal measure. The policy levers required are well understood — a ₹50,000 crore rural credit guarantee fund modelled on PMMY, 100% first-year depreciation allowance for commercial EV operators, GST convergence at 5% across the entire powertrain, and PLI extensions to 2032 covering sodium-ion and LFP chemistries. Without these, NITI Aayog‘s own conservative modelling suggests India will reach 8–10 million EVs by 2030, not the 25 million the government has publicly committed to.
The ₹20,000 premium between a petrol scooter and an electric one is not an insurmountable engineering problem. It is a policy choice — and Budget 2026 has both the tools and the moment to make a different one. GST parity, rural credit architecture, and Battery-as-a-Service infrastructure together could convert that gap from a barrier into a bridge, placing clean mobility within reach of the millions who will ultimately determine whether India’s EV ambition becomes a legacy or a footnote.