2W EV Companies Ola Electric and Ather Energy May Be Hit by Auto GST Cut

With the Indian government planning an overhaul of the Goods and Services Tax (GST) system by October 21, 2025, electric vehicle manufacturers like Ola Electric and Ather Energy might face setbacks, as per news reports. Lower taxes on internal combustion engine (ICE) vehicles could sharpen the price contrast with EVs, potentially affecting their competitiveness and demand.

Lower GST on ICE Vehicles May Disrupt EV Momentum

The current GST rate for EVs stands at 5%, significantly lower than the 28% applied to ICE vehicles, along with an additional cess. However, if GST on all vehicles, including ICE cars, is reduced under the upcoming reform, the price gap that favours EVs could shrink. This may deter new buyers from opting for electric 2-wheelers and 4-wheelers, shifting preference back to traditional fuel vehicles.

Pure EV Players to Be Affected the Most

Unlike diversified automakers, companies solely focused on EV products, such as Ola Electric and Ather Energy, lack a cushion to absorb the impact. These firms are more dependent on the EV segment's competitive edge, which largely relies on tax benefits. A fall in that advantage might stall their sales momentum and production planning.

Read More: GST Overhaul to Boost Growth but May Cost Govt $20 Billion in Revenue!

Government Incentives at Risk of Losing Appeal

Government programmes like the Production Linked Incentive (PLI), which offer 13% to 18% benefits to promote EV manufacturing, could see reduced effectiveness if consumer demand dips. The idea behind these schemes is to level the price point between ICE and EVs. If GST cuts reduce ICE vehicle prices, these benefits may not feel substantial for buyers anymore.

Broader Market Impact and Domestic Preference

Auto firms with strong domestic portfolios that include both ICE and EV options could find opportunities in the revised tax landscape. By contrast, pure EV manufacturers might have to revise pricing strategies or seek additional government intervention to retain competitiveness.

Conclusion

The proposed GST 2.0 reforms aim to simplify taxation and reduce overall cost burdens. However, the unintended consequence could be a slowdown in EV adoption, especially impacting pure electric 2W EV  brands like Ola Electric and Ather Energy. The broader market awaits further clarity on implementation and final rate structures.

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