India's electric vehicle (EV) transition is entering a capital-intensive scale-up phase; however, financing structures and infrastructure gaps could influence 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 approximately Rs. 2.2 trillion (US$ 25.6 billion) in electric mobility between 2020 and 2025 across manufacturing capacity, government fiscal support, and public charging infrastructure.

This represents about 18% of the roughly Rs. 12.5 trillion required to achieve national transport electrification targets by 2030, leaving a funding gap of over Rs. 10.3 trillion to be mobilised within five years.

IEEFA proposes an integrated EV financing platform that combines partial credit guarantees, residual value protection, battery-as-a-service arrangements, and co-lending structures into a 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 situates current investment flows within India's electric transport ecosystem, which includes vehicle manufacturers, battery suppliers, charging operators, financial institutions, and public policy frameworks.

The industry has seen entry from new firms, particularly in the two- and three-wheeler segments, while early growth was largely driven 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% in private cars, 70% in commercial vehicles, 40% in buses, and 80% in two- and three-wheelers by 2030. EV sales have risen across segments in recent years.

Government support schemes and state-level incentives supported early adoption, particularly in electric two- and three-wheelers, which expanded earlier due to total cost of ownership considerations and commercial use cases. However, adoption remains uneven. Although electric two- and three-wheelers have recorded higher absolute sales, adoption rates in most segments remained below 10% as of 2025. The industry structure reflects this pattern, with electric two- and three-wheelers (passenger and cargo) accounting for the largest share of the market, followed by electric four-wheelers and buses. Electric two-wheeler sales crossed the one million mark for the first time in 2024.

Government subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme and other Union- and state-level policies supported adoption by disbursing Rs. 182.5 billion (US$ 2.09 billion) from FY20-24.

After establishing a base level of sales and adoption, the central government began reducing purchase subsidies in April 2023. For instance, the purchase subsidy on electric two-wheelers was reduced by 83%, from Rs. 15,000 (US$ 172) per kilowatt-hour (kWh) in FY22-23 under FAME-II to Rs. 2,500 (US$ 29) per kWh in 2025 under the PM E-DRIVE scheme. According to IEEFA's September 2025 report, this reflects the government's stated intention to shift the industry from a subsidy-driven model to a market-led structure.

Manufacturing investment has accounted for the largest component of capital deployment, largely financed through internal accruals by vehicle manufacturers rather than external capital markets. From 2020 to 2025, internal funding represented the largest share of EV manufacturing investment, reflecting reinvestment by incumbent automakers and limited access to affordable external finance in fragmented market segments. Electric three-wheelers attracted nearly 78% of cumulative manufacturing investment during this period, supported by production expansion among small- and mid-sized manufacturers in response to demand.

Investment allocation is increasingly directed towards electric four-wheelers. While realised investments have historically been concentrated in two- and three-wheelers, recent investment announcements indicate rising capital allocation to electric four-wheelers as model availability expands and consumer demand increases. This indicates a shift from commercial electrification towards greater passenger vehicle participation and manufacturing expansion.

Charging infrastructure remains a constraint. Public charger installations increased from 5,151 units in 2020 to nearly 39,500 in 2025; however, investment in charging infrastructure represents less than one-tenth of the capital required by 2030.

India's charger-to-EV ratio remains below several international benchmarks. The report identifies limited investor interest, low utilisation rates, and high upfront deployment costs as constraints on infrastructure expansion.

Financing conditions remain a key factor linking investment, demand, and manufacturing scale. Commercial EV borrowers face lending rates of 15-33%, driven by uncertainty regarding battery degradation, resale value, and operational performance. These borrowing costs affect demand, fleet expansion, and capital deployment across the value chain. The report states that addressing this issue would require risk-sharing mechanisms rather than additional subsidies, and proposes an integrated financing platform combining credit guarantees, residual value protection, battery-as-a-service, and co-lending structures to reduce borrowing costs and mobilise private capital.

Publicly available estimates indicate that Rs. 206 billion (US$ 2.36 billion) of investment in charging infrastructure will be required for India to meet its 2030 goals. Based on calculations of realised investment, the authors estimate that capital deployed from 2020 to 2025 accounted for 9.6% of this amount.

"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 energy transition framework, transport electrification is identified as a component linked to oil import reduction, air quality considerations, and the integration of renewable power with end-use decarbonisation. The report states that the sector is moving from a policy-led adoption phase towards a market-formation stage in which financial structures, infrastructure deployment, and investor participation will influence the pace of electric mobility expansion in relation to climate and energy security targets.