India’s $200 Billion EV Opportunity Hinges on Urgent Policy Shift: NITI Aayog

India’s EV sector is booming but more needs to be done accelerate EV adoption as soon as possible in order to realise the country’s target of achieving 30 percent EV penetration by 2030, says a new report from NITI Aayog.

The government thin-tank’s report, titled “Electric Vehicles in India: Unlocking a $200 Billion Opportunity”, outlines a comprehensive roadmap to overcome key barriers and accelerate electric mobility across the country.

India’s EV sector expanded considerably through the last decade. The report notes that, from just 50,000 units sold in 2016, the Indian EV market boomed, with the country registering over 2 million EV sales in 2024.

Despite the commendable growth, India’s EV penetration lagged in comparison to global average penetration of about 16.5 percent. Notably, EVs only accounted for about 7.6 percent of the total vehicle sales in India in 2024, which is also far behind the actual target of 30 percent, and just about five years to go.

While India has shown strong growth in electric two- and three-wheelers, adoption in electric buses, cars, and especially trucks remains sluggish.

A Shift from Incentives to Mandates: NITI Suggests

NITI’s report calls for a strategic shift from financial incentives to regulatory mandates and disincentives, particularly for high-impact vehicle segments. It suggests introducing clear Zero Emission Vehicle (ZEV) targets and tightening fuel efficiency standards.

“Over INR 40,000 crore has already been spent on incentives through FAME and PLI schemes, but we’ve only reached 7.6 percent EV sales. It’s time to send stronger policy signals,” the report notes. 

It recommends beginning with mandates for public buses, government fleets, and urban freight vehicles, where transition is more manageable and has high public benefit.

Focus on High-Impact Segments

Considering the huge emission potential of the vehicles, such as buses, trucks, paratransit, and urban freight vehicles, NITI Aayog analysis recommends prioritising them for te policy push. Interestingy, while the emission potential of the segment is huge, their overall share in vehicles is far less. For instance, trucks constitute just 3 percent of vehicles but emit 34 percent of transport-related CO2, making them an ideal segment for electrification.

On the other hand, two-wheelers category is also being considered on high priority due to their sheer volume and the ease of charging at home. On the other hand, personal cars are given lower priority due to their limited numbers and high infrastructure needs.

5 Cities, 5 Years: A Novel Approach

Proposing a new approach, the government think tank suggests unique strategy to help EV penetrate deeper in the Indian cities. The report advocates for focusing on full electrification of select cities rather than spreading EV investments evenly across India.

It proposes a “5 Cities, 5 Years” model where all public transport and urban freight vehicles are transitioned to EVs. This approach, the report argues, will yield visible air quality benefits, enable efficient infrastructure use, and serve as a blueprint for wider replication.

Tackling Financing Challenges

High capital costs continue to pose a significant barrier to the adoption of electric vehicles in India, particularly in the case of electric buses and trucks. These vehicles are currently priced at two to three times the cost of their diesel counterparts, making them unaffordable for many small fleet owners and transport operators.

To address this, the NITI Aayog report recommends the creation of a blended finance fund. This fund would pool resources from public budgets and multilateral development banks to offer lower-interest loans for the procurement of electric buses and trucks. Such a mechanism could reduce the financial burden on buyers and improve the bankability of EV projects.

In addition, the report calls for the promotion of battery leasing models, which would allow vehicle owners to lease batteries instead of purchasing them outright. This approach significantly reduces the upfront cost of EVs, making them more accessible.

The report also suggests including electric vehicles in priority sector lending categories, ensuring easier access to credit through government-mandated lending quotas. Moreover, support should be extended to vehicle leasing companies, which can buy EVs at scale and lease them to small operators, further lowering ownership barriers.

Another critical recommendation is the establishment of a battery passport system. This system would maintain digital records of battery health and usage history, improving transparency and enabling accurate assessment of residual value. Such data would help financial institutions make informed lending decisions and boost confidence in the resale market for EVs.

Ramping Up Charging Infrastructure

Despite progress, charging infrastructure remains a major hurdle due to poor planning and under-utilised public stations. To address this, NITI Aayog recommends state-level nodal agencies (like Singapore’s EVe) to coordinate planning and streamline approvals.

The report calls for fast-charging hubs on 20 key freight corridors, along with Time-of-Day (ToD) pricing and dedicated EV power lines (EVPL) to optimise grid usage. A unified national app is also proposed to help users find, book, and pay for charging easily.

Importantly, NITI Aayog stresses that charging stations must be located based on travel patterns, not spread evenly. It also urges building bylaw reforms to support home and workplace charging.

Boosting Awareness and R&D

Boositng awareness further is crucial for India to realise its intended EV targets, the report notes. Consumer awareness and misinformation remain significant barriers to electric vehicle adoption in India. Misconceptions around fire hazards, battery degradation, and poor resale value continue to deter potential buyers. To counter this, the report calls for a national awareness campaign to educate consumers and build trust in EV technology.

Additionally, the development of digital tools - such as real-time charging maps and total cost of ownership (TCO) calculators - is recommended to help users make informed decisions and better understand the long-term benefits of EVs.

The report also highlights the need to scale up battery R&D, particularly in sodium-ion and rare-earth-free technologies, through stronger collaboration between academia, industry, and government. These innovations are critical for reducing costs, improving energy density, and cutting import dependence.

With the right investments and policy coordination, NITI Aayog concludes that India can not only achieve its 2030 EV targets but also tap into a USD 200 billion economic opportunity spanning EV manufacturing, services, and battery innovation.