As fuel prices rise and concerns over oil imports persist, electric vehicles (EVs) are increasingly being prescribed by policymakers, economists and industry executives as part of the solution. But while a shift to EVs may help reduce fuel consumption at the economy level, the ownership economics for many private vehicle buyers remain less straightforward.
An April 2026 study by the Centre for Social and Economic Progress (CSEP) found that electric passenger vehicles do not achieve total cost of ownership (TCO) parity with comparable internal combustion engine (ICE) cars within a 10-year ownership cycle for many private users. Consumers, industry observers said, typically make car purchase decisions based on ownership costs and payback periods rather than broader macroeconomic objectives.
For many buyers, the purchase decision begins with upfront cost rather than fuel savings over a decade. Although prices of electric vehicles have moderated in recent years, they continue to carry a premium over comparable petrol-powered vehicles, largely due to battery costs.
Running Costs
The CSEP study found that ownership economics differ sharply based on vehicle usage. The average private user drives around 33 km a day, according to its estimates. Even at current fuel prices, such users could save substantially on annual operating expenses by switching to electric vehicles, but the higher purchase price continues to offset much of that advantage. “The recent hikes will help, but only at the margins,” said Shyamasis Das, fellow at CSEP. “At best, parity timelines may shorten by a few months to a year depending on the kilometres driven daily,” he added.
Industry estimates suggest petrol vehicle running costs are in the range of Rs 7-9 per kilometre, while charging costs for EVs using home charging infrastructure may be around Rs 1-2 per kilometre. But upfront premiums in the range of Rs 4-5 lakh in mass-market segments can extend payback periods beyond the typical ownership cycle of many buyers. The CSEP analysis noted that TCO parity needs to be achieved within the first five years of ownership for EVs to become financially attractive, as many first-time buyers replace vehicles within four to five years.
Commercial Sweet Spot
The economics improve materially at higher utilisation levels. According to the study, when daily vehicle usage rises to around 132 km — closer to commercial vehicle usage patterns — TCO parity between EVs and ICE vehicles can be achieved within the third year of ownership. The gap also narrows as vehicle prices move up the value chain. While mass-market EVs can command substantial premiums over comparable petrol vehicles, the difference reduces in premium and luxury segments, making ownership economics more favourable.
Gaurav Vangaal, associate director, light vehicle forecasting at S&P Global Mobility, said lower battery costs and supply-chain development may ultimately have a larger role in changing EV economics than fuel price movements alone.
“It is battery localisation, maturing supply chains and the launch of lower-cost mass-market electric models that will help bring TCO parity between EVs and ICE vehicles closer,” he said.
The mismatch between broader policy objectives and household economics could remain a key challenge for EV adoption. While reducing oil imports may strengthen the case for electrification at a national level, wider adoption among private buyers may increasingly depend on whether the financial arithmetic works at the household level.
(Next: Renewable energy)