India’s EV Transition Needs ₹12.5 Lakh Cr as Investment Gap Widens: IEEFA

India’s electric transport sector has attracted substantial capital inflows over the past five years, but the industry will need a cohesive and scalable investment framework to meet its 2030 targets, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

The authors estimate that ₹2,23,119 crore ($25.6 billion) was deployed across three core nodes of India’s electric transport ecosystem between 2020 and 2025. Manufacturing capacity accounted for the largest share, followed by public subsidies and incentives, and investment in EV charging infrastructure.

IEEFA’s report, Capital Flows in India’s Electric Transport Sector, provides the first consolidated view of realised investments from 2020–2025, identifies key investment gaps, and outlines pathways to mobilise capital for the next phase of India’s electric transport transition.

The report notes that as EV sales volumes increase and performance data deepens, risk premiums could decline, underwriting standards could become more uniform, and capital recycling through securitisation could emerge as a viable financing tool. Together, these developments could create a self-reinforcing investment cycle, in which lower financing costs drive higher adoption, improve revenue visibility, reduce perceived risk, and attract additional capital.

To enable this transition, 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 coordinated at the point of lending. Development finance institutions with established 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.

This need for financing reform is particularly urgent given India’s ambitious 2030 targets, which aim for electric vehicles to account for 30% of private car sales, 70% of commercial vehicles, 40% of buses, and 80% of two- and three-wheelers. Achieving these goals will require sustained investment across EV manufacturing, charging infrastructure, and supporting ecosystems.

“While ₹2.23 lakh crore is a significant capital mobilisation in just five years, it represents only about 18% of the ₹12.5 lakh crore required by 2030,” said Subham Shrivastava, Climate Finance Analyst at IEEFA. “Mobilising the remaining ₹10.26 lakh crore ($117.82 billion) by 2030 will require systemic financing reforms.”

EV Makers Fund ₹1.6 Lakh Crore Expansion Via Internal Accruals

A breakdown of investments shows that internal accruals accounted for the largest share of realised EV manufacturing investment, totalling ₹1,59,701 crore ($18.32 billion). This was followed by debt funding of ₹36,738 crore ($4.22 billion) and equity investments of ₹6,455 crore ($740 million).

However, this aggregate picture masks significant variation across vehicle segments, reflecting differences in market structure, capital intensity, and the composition of firms operating in each segment.

For example, the electric three-wheeler segment, characterised by a highly fragmented original equipment manufacturer (OEM) base, relied predominantly on internal accruals supplemented by some debt. In contrast, electric four-wheeler and two-wheeler segments, led by more established incumbents, exhibited a more diversified financing mix.

“From 2020–2025, electric three-wheelers attracted the largest share—around 78%—of investments among vehicle segments, driven by the segment’s maturity and commercial-scale operations alongside its fragmented OEM base,” said Saurabh Trivedi, Sustainable Finance Specialist at IEEFA. “However, recent investment announcements in 2024 and 2025 indicate a pivot towards electric four-wheelers, reflecting rising demand for electric cars.”

Ratio of EV Chargers to EVs Falls Below Global Benchmarks

Investment in public EV charging infrastructure, however, has lagged other segments of the EV ecosystem. While the number of public chargers rose sharply from 5,151 in 2020 to 39,485 in 2025, India’s charger-to-EV ratio remains well below global benchmarks.

Public estimates suggest that ₹20,600 crore ($2.36 billion) will be required to build adequate charging infrastructure to meet India’s 2030 targets. Based on realised investment levels, the authors estimate that capital deployed between 2020 and 2025 accounted for just 9.6% of this requirement, underscoring a substantial investment shortfall.

“Investment in EV charging faces persistent challenges due to limited investor interest, as public charging remains an unproven business model, with many stations reporting low utilisation rates and high upfront costs,” said Charith Konda, Energy Specialist at IEEFA.

Estimated 82% of Required Investment Still Unmet

With an estimated 82% of required investment still unmet, the report argues that the central challenge facing India’s EV transition is no longer policy ambition, but the cost and structure of capital. Commercial EV borrowers currently face interest rates ranging from 15% to 33%, significantly eroding the total cost-of-ownership advantages that electric vehicles would otherwise offer. High financing costs dampen demand, delay fleet expansion, and ultimately constrain manufacturing capacity growth.

“The binding constraint is not a lack of capital in the system—it is how EV risk is priced,” Shrivastava said. “Uncertainty around battery performance, residual values, and cash-flow stability is reflected in higher interest rates.”

Bridging the ₹10.3 lakh crore ($117.82 billion) investment gap over the next five years will therefore require moving beyond traditional subsidy-led approaches toward structural risk-sharing mechanisms that reduce borrowing costs and attract private capital.

“Manufacturers need predictable demand signals to scale capacity, but demand depends heavily on affordable credit,” Trivedi added. “An integrated platform that appropriately shares risk across lenders, OEMs, and public institutions can lower financing costs and unlock commercial-scale deployment.”