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India’s electric vehicle (EV) transition is entering a capital-intensive scale-up phase, but financing structures and infrastructure gaps could determine whether the country meets its 2030 electrification goals, according to a new report.
The report, titled ‘Capital flows in India’s electric transport sector’, by the Institute for Energy Economics and Financial Analysis (IEEFA) estimates that India deployed about Rs 2,23,119 crore ($25.6 billion) in electric mobility between 2020 and 2025 across manufacturing capacity, government fiscal support and public charging infrastructure.
While substantial, this represents only about 18 per cent of the roughly Rs 12,50,000 crore required to achieve national transport electrification targets by 2030, leaving a funding gap of over Rs 10,30,000 crore to be mobilised within five years.
IEEFA proposes an integrated EV financing platform that bundles partial credit guarantees, residual value protection, battery-as-a-service arrangements, and co-lending structures into a unified framework co-ordinated at the point of lending. Development finance institutions with existing guarantee infrastructure and banking relationships would anchor the platform—SIDBI for the MSME segment, including commercial two- and three-wheelers and small fleet operators, and IIFCL for larger commercial fleets, bus deployments, and institutional buyers.
“Manufacturers need predictable demand signals to scale capacity, but demand depends heavily on affordable credit,” a statement by IEEFA quoted report co-author and Sustainable Finance Specialist at the organisation, Saurabh Trivedi. “An integrated platform that shares risks appropriately across lenders, OEMs, and public institutions can reduce financing costs and unlock commercial-scale deployment,” it added.
The report places current investment flows within the broader evolution of India’s electric transport ecosystem, which spans vehicle manufacturers, battery suppliers, charging operators, financial institutions and public policy frameworks.
The industry has seen strong entry from new firms, especially in two- and three-wheelers, while early growth was driven largely by central and state policies that set targets, offered incentives and promoted zero-emission mobility.
India aims to increase the share of EV sales to 30 per cent in private cars, 70 per cent in commercial vehicles, 40 per cent in buses, and 80 per cent in two- and three-wheelers by 2030. Progress toward these goals has accelerated in recent years, with overall EV sales rising steadily across segments.
Government support schemes and state-level incentives helped catalyse early adoption, particularly in electric two- and three-wheelers, which achieved scale earlier due to strong total cost of ownership advantages and commercial use cases. However, adoption remains uneven, while E2Ws and E3Ws have gained meaningful traction in absolute sales terms, adoption rates in most segments remained below 10 per cent as of 2025. The industry structure reflects this divergence, with E2Ws and E3Ws (passenger and cargo) dominating the market, followed by electric cars (E4Ws) and buses. Notably, E2W sales crossed the one million (10 lakh) mark for the first time in 2024, signalling growing scale and market acceptance in the segment.
Government subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme and other Union- and state-level policies catalysed adoption by disbursing Rs 18,251 crore ($2.09 billion) from FY20-24.
Having established a base with reasonable sales and adoption rates, the central government started tapering purchase subsidies in April 2023. For instance, the purchase subsidy on electric two-wheelers (E2Ws) was reduced by 83 per cent from Rs 15,000 ($172) per kilowatt-hour (kWh) in FY22-23 under FAME-II to Rs 2,500 ($29)/kWh in 2025 under the PM E-DRIVE scheme. According to IEEFA’s September 2025 report, this indicates the government’s aim to transition the industry from a subsidy-driven one to a market-led, mature industry.
Manufacturing investment has been the dominant component of capital deployment, largely financed through internal accruals by vehicle manufacturers rather than external capital markets. From 2020 to 2025, internal funding accounted for the largest share of EV manufacturing investment, reflecting both strategic reinvestment by incumbent automakers and limited access to affordable external finance in fragmented market segments. Electric three-wheelers alone attracted nearly 78 per cent of cumulative manufacturing investment during this period, driven by a large base of small- and mid-sized manufacturers scaling production in response to proven demand.
Investment momentum, however, is shifting toward EVs. While realised investments have historically concentrated in two- and three-wheelers, recent investment announcements indicate growing capital allocation to electric four-wheelers as model availability expands and consumer demand strengthens. This transition signals a move from early-stage commercial electrification toward broader passenger vehicle adoption and platform-based manufacturing expansion.
Charging infrastructure remains a major structural bottleneck. Public charger installations increased sharply from 5,151 units in 2020 to nearly 39,500 in 2025, yet investment in charging infrastructure still represents less than one-tenth of the capital required by 2030.
India’s charger-to-EV ratio remains significantly below global benchmarks, and the report identifies weak investor confidence, low utilisation rates and high upfront deployment costs as key constraints on infrastructure expansion.
Financing conditions for EV adoption emerge as the central challenge linking investment, demand and manufacturing scale. Commercial EV borrowers face lending rates of 15-33 per cent, driven by uncertainty around battery degradation, resale value and operational performance. These high borrowing costs weaken demand signals, delay fleet expansion and slow capital deployment across the value chain. The report argues that breaking this cycle requires systemic risk-sharing mechanisms rather than additional subsidies, proposing an integrated financing platform combining credit guarantees, residual value protection, battery-as-a-service and co-lending structures to reduce borrowing costs and attract private capital.
Publicly available estimates suggest that Rs 20,600 crore ($2.36 billion) of investment in charging infrastructure will be required for India to achieve its 2030 goals. Based on calculations of realised investment, the authors estimate that capital deployed from 2020-2025 accounted for only 9.6 per cent of this amount, highlighting a significant investment gap.
“Investment in EV charging faces challenges due to limited investor interest, as public EV charging remains an unproven business model, with many charging stations reporting low utilisation rates and high initial costs,” the statement quoted co-author and Energy Specialist at IEEFA, Charith Konda.
Within India’s broader energy transition, transport electrification is positioned as a key lever for reducing oil imports, improving air quality and linking renewable power growth with end-use decarbonisation. The report concludes that the country has moved beyond the policy-led adoption phase toward a market-formation stage in which financial architecture, infrastructure scale and investor confidence will determine whether electric mobility can expand rapidly enough to meet climate and energy security objectives.