A recent cut in Goods and Services Tax (GST) on certain internal combustion engine (ICE) vehicles and strategic price cuts by carmakers has made some petrol and diesel SUVs ₹2 lakh cheaper or more. That’s good news for car buyers, but it also complicates one of today’s biggest financial decisions: does an electric vehicle (EV) still make economic sense? The debate gains importance as air quality deteriorates sharply in the capital city and nearby, partly due to vehicle emissions.
Effective 22 September 2025, the GST on small cars (up to 1200cc petrol/CNG and 1500cc diesel, under 4m length) has been reduced from 28% to 18%, while electric vehicles continue to be taxed at a concessional 5% GST rate.
“EV was a little bit more attractive earlier, now the comparative economics has moved a little bit,” said Subhabrata Sengupta, partner at Avalon Consulting. “The decision will come down to your usage pattern and what you’re comfortable with,” he said.
Running costs vs. upfront price
EVs are cheaper to run since they use electricity instead of fuel. But do those savings offset their higher purchase price? The answer depends largely on how much you drive.
“If you don’t have a good running, then no EV,” said Sourabh Sikri, a 47-year-old businessman in Dwarka, Delhi, who bought his first electric car last year.
Sikri hadn’t started out to buy an EV. Rather, he had a list of features that he wanted in his next car such as it should be a 7-seater, it should be an automatic drive and have a luxury feel.
He initially considered a petrol MG Hector Plus but ultimately chose the BYD eMax 7, paying ₹10 lakh more. He drives 50–80km daily for five days a week and calculated that the extra cost would be recovered in 3–4 years through fuel savings.
However, he advised against it for his brother in Pune, who drives just 5km a day. “If you invest in EV and don’t use it a lot, then the whole money is wasted,” he said.
The cost calculation
There are several online tools available to compare fuel cost savings between EVs and traditional petrol or diesel cars. For illustration, we examined two different car segments in two cities, since fuel and electricity costs vary by location.
However, not all carmakers offer EV versions across segments—small cars, for instance, have limited electric options. For this analysis, we compared the base model of a Maruti Swift (petrol) with the Tata Tiago EV’s base model.
In Mumbai, the Swift’s on-road price is around ₹6.77 lakh, or approximately ₹8 lakh when bought on loan, based on CarDekho estimates. The loan calculation assumes a down payment of ₹1 lakh and an interest rate of 9.8% payable over four years. The Tiago EV, by comparison, costs ₹8.33 lakh when purchased outright and ₹9.89 lakh when financed under the same terms.
Now, consider a car that’s driven 30km a day, five days a week—or roughly 150km per week. To estimate running costs, we used a NITI Aayog calculator, assuming home charging at ₹8 per unit of electricity. The Tiago EV’s base model, with a 250km range per full charge, works out to a running cost of just ₹0.61 per km—or about ₹4,790 annually.
In contrast, with petrol priced at ₹104.21 per litre in Mumbai and the Swift delivering a mileage of 24.8 km per litre, the annual fuel cost comes to ₹32,776. That means annual savings of roughly ₹27,980 for the EV.
At this rate, the extra capital cost of the Tiago can be recovered in about 5.6 years if purchased outright. Assuming the EV battery last at least a decade, this is financially viable. However, if the car is financed through a loan, the recovery period extends to around seven years, making the deal less attractive.
The math changes if you drive more. For instance, at 600km of weekly driving, annual fuel savings rise to about ₹55,966—enough to recover the higher EV cost in under four years, even with a loan.
The Nexon example
We also compared the petrol and EV versions of the Tata Nexon, one of India’s best-selling compact SUVs, assuming car use in Delhi.
If the EV is charged entirely at home at ₹7 per unit of electricity and driven 150km a week, it would take nearly 13.6 years to recover the extra cost of the Nexon EV when bought outright—and even longer on a loan, making it financially unviable.
However, if the car is driven 300km a week, the break-even period drops to about seven years for an outright purchase, making the EV worth considering.
Actual costs, of course, depend on individual circumstances. Charging at private EV stations is more expensive than home charging, and installing a home or workplace charger adds to upfront costs.
Other costs to consider
Maintenance costs are generally lower for EVs since they have fewer moving parts and don’t require oil changes.
Udai Shringi, a 53-year-old Delhi resident who has driven an MG ZS EV for three years, said his servicing expenses are about 50% lower than for his diesel car.
I drive 100 to 140km daily during the week, and my servicing cost is half, he said.
Repair costs, however, can be higher, as EVs require specialized tools and technology. That said, most major EV manufacturers offer long warranties that cover most issues in the initial years. “My car has a five-year warranty, and so far, I haven’t faced any repair issues,” Shringi added.
Beyond the math
Of course, cost isn’t the only factor that drives the choice of your dream car.
For EVs, charging infrastructure remains a crucial consideration. Not all housing societies are equipped with at-home charging facilities, and while public charging stations are growing in number, they’re still nowhere near as common as petrol pumps. This can make long-distance travel trickier—“you have to plan your stops,” said Shringi.
That said, EVs come with their own undeniable appeal—from their near-silent engines to the seamless acceleration that gives them a distinctly premium feel on the road.
With around 20 electric car models now available in India, the segment is steadily expanding. For those who can make the numbers—and the logistics — work, it might just be the right time to plug into the future.
