Karnataka withdraws blanket EV road tax exemption; introduces graded lifetime levy

Karnataka has withdrawn its blanket road tax exemption for electric vehicles (EVs), marking a reversal of its nearly decade-long policy of incentivising clean mobility.

Under the revised framework, EVs will now attract a one-time lifetime road tax at the time of registration, with rates linked to the vehicle’s cost. The exemption, first introduced in March 2016, had made Karnataka one of the most EV-friendly states in the country.

As per the new structure, EVs priced up to ₹10 lakh will be taxed at 5%, those between ₹10 lakh and ₹25 lakh at 8%, and vehicles above ₹25 lakh at 10%. Since 2024, the state has already begun scaling back incentives by levying a lifetime tax on EVs priced above ₹25 lakh.

Data cited by Moneycontrol shows that EVs accounted for 6.4% of total vehicle sales in calendar year 2025, indicating gradual but steady adoption.
Karnataka remains a key market, contributing around 12% to India’s EV volumes (excluding Telangana).

Auto Shares In Focus 

The policy shift comes as states reassess incentive structures amid rising EV adoption and evolving revenue considerations. Higher upfront costs due to the tax may weigh on demand in price-sensitive segments, though the long-term impact on adoption remains to be seen.

Shares of electric vehicle-linked companies such as Tata Motors and Mahindra & Mahindra are likely to be in focus following the policy change, given their presence in the EV passenger vehicle segment. Auto ancillary and battery makers such as Exide Industries and Amara Raja Energy & Mobility could also see investor attention, along with EV ecosystem players including Tata Power and Olectra Greentech.

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