Driving towards greener pastures: How India's EV industry is set to grow

Are you a car enthusiast who does not want to harm the climate with fuel emissions but also wants to experience futuristic driving guilt-free? Then look no further, as opting for an electric vehicle is the way to go! 

India’s electric vehicle (EV) scenario is charging up fast, and the anticipated incentives from the government's FAME III scheme are expected to boost the market further. Being the world’s fourth-largest auto market, as per Organisation Internationale des Constructeurs d'Automobiles (OICA), the interest towards electric vehicles is gaining much pace in the country, signalling a growing acceptance of electric mobility. 

The last few years have seen a fundamental shift in how India looks at electric vehicles. In 2023, EV sales hit a significant milestone, crossing the 1 million mark. Bain & Company, in a report in 2023, stated that electric vehicles could account for more than 40% of India’s automotive market and generate over $100 billion of revenue by 2030.

Future of EVs in India

Projections for the EV market are also showing positive signs. By 2030, it is estimated that the sales volume for this market segment will surpass 17 million units annually.

For FY25, a CareEdge Rating report says EV sales in India are projected to reach 1.3 -1.5 lakh units, representing a significant increase from the 90,432 units sold in FY24, which saw a year-over-year growth of 90%. Here's more:

--EV sales grew nearly 16% in the first half (H1) of 2023-24, year-on-year, from 7,23,492 units to 8,42,396 units, according to VAHAN data that tracks vehicle registrations. The data for H1 2024-2025 have not yet been declared. 
 
--Quarter-wise, in the current fiscal, Uttar Pradesh accounted for the highest share (19%) of EVs sold, with 78,259 units in Q1FY25. Of the total EVs sold in Uttar Pradesh, 59.8% (46,810 units) were pax e-rickshaws. 

--e-2W sales are highest for Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh, and Rajasthan, accounting for 50.9% of high-speed e-2W sales for Q1FY25.

-- Maharashtra registered the highest sales of e-4Ws, with 3,356 units sold in Q1, followed by Kerala and Karnataka, with 2,803 and 2,779 units sold, respectively. Maharashtra also saw the highest e-bus sales, with 191 units. 

Why are people moving to EVs?

First, the running costs are way lower than for petrol or diesel vehicles, making it a no-brainer for many commuters. Charging an EV is much cheaper than refuelling a petrol or diesel vehicle, and electricity costs are often a fraction of fuel prices. 

Environmental awareness is another factor for many consumers looking to mitigate adverse effects on the planet. By transitioning to EVs, India can significantly cut its carbon footprint and contribute to global efforts to keep temperature rises below 1.5°C, a key goal of climate agreements.

Then comes the technological advancements. Most EVs are coming up with class-leading features in India. For example, Tata Nexon’s top variant ICE model runs on either petrol or diesel, with fuel efficiency ranging from 17-18 km/l (petrol) to 21 km/l (diesel), while its EV variant (Nexon EV Max) offers a range of 312-453 km on a full charge. Remember that the initial cost of purchasing an EV remains high compared with ICE models.

Add to that the growing number of government incentives and subsidies. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, particularly FAME II and the anticipated FAME III initiative provides subsidies for electric two-wheelers, cars, and buses, making EVs more affordable for consumers.

Other government measures, such as the Production Linked Incentive (PLI) scheme, promote local manufacturing of EVs and critical components, such as batteries, which further drives industry growth​. The PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage received Rs 250 crore in the 2024-25 Budget, significantly higher than the revised estimate of Rs 12 crore in 2023-24.

States are also jumping in with their policies, offering even more incentives for EV buyers and making it easier to set up charging stations. Cities like Delhi, Mumbai, and Bengaluru have already made good progress. 

Challenges in the EV market

Despite the push for EVs in India and quick adoption by consumers in the recent past, reports show that the transition from fossil fuels to electric vehicles seems slow in pace. A KPMG report, 'Getting real about the EV transition', summarises, "It’s still an exciting—and rewarding—journey, but it may take longer, and the ride won’t be smooth." Other crucial areas that need attention are:

Charging Infrastructure: The number of charging stations in India per car sold still needs to be increased. India has an active network of 934 active public charging stations, mostly limited to major urban areas like Delhi, Bengaluru, and Mumbai. The government and private companies are working together to establish a nationwide charging network, but it will take time to become widespread.

Affordability and Upfront Costs: Although the long-term savings on fuel and maintenance make EVs attractive, the initial cost of purchasing an EV remains high for many Indian consumers. While government subsidies and declining battery costs are helping to close this gap, EVs are still more expensive than their ICE counterparts. Automakers are focusing on producing affordable EVs catering to the mass market to address this.

Dependence on Imports for Key Components: Despite discoveries of lithium deposits in states like Jammu & Kashmir and Rajasthan​, India still relies heavily on imports, particularly from China. This poses risks in terms of supply chain disruptions and cost fluctuations. 

Silver lining

The challenges mentioned above are not a path-breaker for the EV market in India. Due to rising domestic competition and the government's push towards cleaner energy use, India has the potential to leapfrog traditional automotive technologies and build a sustainable, green transportation network. This will also be crucial for long-term climate resilience and sustainability.

Moreover, there is a growing adoption of EVs in public transport. E-cabs and e-buses are better for both consumers and operators in the long run because of their sustainability, cost-effectiveness, and convenience compared to traditional cabs in India. Popular routes that have adopted EVs for public transport include Delhi-NCR, Bengaluru, Mumbai, Hyderabad, and Pune.

Considering these reasons, the EV sector is poised to grow and will play a key role in shaping India's transportation future, ensuring sustainable, eco-friendly mobility for future generations.

Disclaimer: The information provided in this article is for informational purposes only and is not intended as financial, investment, or professional advice. Readers are encouraged to seek independent advice before acting on any information contained in this article. Smallcase Technologies Private Limited disclaims any responsibility for actions taken based on the content of this publication.