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India’s auto sector in 2025: Fuel changes, GST reset and EVs reshape the market

Ankita Jain, 31/12/202531/12/2025

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Fuel Mandate: Targeting lower oil imports and higher ethanol usage, India switched to E20 petrol across the country from April. The change raised questions about engine life and reduced mileage, and independent tests showed a larger decline than anticipated. Customers sought clarity on warranty and compatibility. The courts supported this implementation, indicating that the policy would continue and shape how fuels are managed for years to come.

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Tax Overhaul: GST has brought about changes in vehicle pricing across various categories. Compact cars were shifted to 18 per cent GST, larger vehicles moved to a similar 40 per cent slab, and sub-350 cc two-wheelers also came to 18 per cent. Big motorcycles became expensive. Automakers further reduced prices to support sales, align tax changes with seasonal demand and changing affordability patterns across the market.

(photo Credit : bloomberg,

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Import Changes: The Union Budget cut import duties on motorcycles below 1,600 cc and removed customs duties on many EV battery inputs and related capital goods. Vehicles over 50 years old can now be imported without a license, although overall duties are higher and resale rules are stricter. These steps encouraged localization, supported EV manufacturing inputs and formalized a niche collector market.

bharatpe phonepe

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Global Agreement: The India-UK trade agreement introduced a phased duty cut for luxury cars and big bikes manufactured in the UK, eventually reducing rates to 10 per cent through a quota system. Britain will remove duties on electric vehicles made in India for the sixth year. UK-based brands enjoy price advantages, while Indian manufacturers get a clear path to new export volumes.

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EV Ecosystem: Tesla opened its first showroom and charging network, and VinFast launched two electric SUVs while outlining broader product plans. A government scheme aimed to attract global EV investment, although initial participation was limited. A separate program for rare-earth magnet production was launched following supply disruptions, with an emphasis on securing key materials and building stronger EV supply chains.

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Corporate Control: Following Nissan’s exit, Renault took full charge of its Chennai plant and gained control over production schedules, workforce planning and capacity utilization. The brand also opened a new design center in the city, its second largest worldwide. This shift highlights how multinational companies are reorganizing Indian operations to prioritize design input, localization and clear decision making.

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Efficiency Target: The draft CAFE 3 rules set tougher fuel-efficiency and CO₂ targets for the period 2027 to 2032. Automakers will need to adjust model portfolios to meet fleet-average standards. Smaller cars can claim additional reductions in reported emissions, and hybrids and EVs can count as super credits. The industry debate focuses on pricing, strategy and compliance timelines.

Report dirty highway toilets and get ₹1,000 Fastag recharge. (Representative image created by ChatGPT)

(photo Credit : Report dirty highway toilets and get ₹1,000 Fastag recharge. (Representative image created by ChatGPT) ,

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Infrastructure features: India opened the world’s highest motorable road in Mig La, improving access to remote areas and strengthening border links. The national FASTag annual pass saw strong adoption, offering toll savings but leaving out many key routes. Delhi tightened rules on older vehicles, limited access to fuel and increased the cost of fitness after 15 years, signaling stronger enforcement on urban emissions.

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Market Speed: The year started slow, but GST restructuring and festival demand turned things around. Strong sales from September to November pushed projected growth to 4.5-5 percent, with more than 42 lakh vehicles sold by November and 50 lakh expected by the end of the year. Rapidly discovered how policy timing and price signals influence buyer decisions and dealer performance.

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Brand Milestones: Several long-running models celebrated major anniversaries – Hyundai Creta completed 10 years, Toyota Innova and Maruti Swift completed 20 years, Maruti Alto completed 25 years with five million sales, and Mahindra Bolero completed 25 years. The midsize SUV segment is booming with new launches and assured returns, highlighting how enduring model allegiances and shifting segment focus are shaping future strategies.

India News CAFE 3 CriteriaDelhi Vehicle RulesE20 fuel indiaEV policy Indiafastag annual passgst auto taxIncrease in car sales in Indiaindia auto 2025india uk fta carsmi la roadmid-size SUV marketrare earth magnets indiaRenault Chennai PlantTesla India launchVinfast India

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