UP's electric vehicle tax review sparks fresh jitters among automakers

Uttar Pradesh is the second-largest car market in India by volume, but when it comes to EV sales, the state currently ranks eighth

The State Transformation Commission (STC) of Uttar Pradesh (UP) on Thursday called a meeting with the transport department to “review” all tax exemptions given to electric vehicle (EV), just about two-months after the latter extended the road tax exemption for EVs for another five years, government officials told Business Standard.

 

This sudden rethink has unsettled the industry, with senior executives at major EV makers saying they are “deeply worried” that such policy “flip-flops” could undermine a segment that is still finding its feet in the state.

 

UP is the second-largest car market in India by volume, but when it comes to EV sales, the state currently ranks eighth. A senior industry executive said EV sales in UP had slowed because the state extended road tax exemptions to strong hybrid cars between July 2024 and October 2025, diluting the incentive to buy pure EVs.

 

On October 17, however, the transport department extended the exemption only for EVs, removing strong hybrids from the list.

 

Officials said strong hybrids were excluded because the state wants to prioritise domestic manufacturing of electric cars as part of a shift toward “energy security, stability and a zero-emission future”.

 

They added that the state followed in the footsteps of the GST Council, which, during the recent rate rationalisation in September, kept EVs at the 5 per cent slab while placing all other cars in higher tax brackets, signalling that incentives should primarily flow to EVs.

 

Officials said that the meeting between the STC and the UP transport department took place on Thursday afternoon to “review” the road tax exemption for EVs, during which the recent removal of strong hybrids from this exemption was also discussed.

 

An executive at a major EV manufacturer said policy certainty is essential for a new technology that requires substantial investment. When asked about the meeting between the STC and the UP transport department, the executive expressed concern that the state might again extend road tax exemptions to strong hybrid cars alongside EVs.

 

India’s top six EV makers -- Tata Motors Passenger Vehicles, JSW MG, Mahindra & Mahindra, Kia, BYD, and Hyundai -- did not respond to Business Standard’s queries on the matter.

 

The UP STC also did not immediately respond to the newspaper’s emailed questions regarding the issue.

 

According to Vahan vehicle registration data for November, Maharashtra led the country in EV sales with 2,116 units, followed by Karnataka, Delhi, Tamil Nadu, Kerala, Gujarat, and Rajasthan in second through seventh positions. In contrast, Uttar Pradesh recorded just 862 EV sales, placing it eighth in the country.

 

The contrast is stark when looking at overall car sales: Uttar Pradesh ranks second in the country, according to SIAM data, with 100,481 vehicles sold in the July-September period, while Maharashtra remained the top state with 131,822 units. This highlights that while Uttar Pradesh is a major car market, EV adoption in the state is lagging behind many smaller states.