New Delhi: India’s passenger vehicle industry is set to make a significant push towards electric mobility, with more than ₹24,000 crore of planned investments expected to be directed towards electric vehicle (EV) expansion over the next two financial years. The projection comes from a recent report by Crisil Ratings, which highlights the growing confidence of automakers in the long-term prospects of the electric passenger vehicle market despite existing challenges related to charging infrastructure and profitability.
According to the report, passenger vehicle manufacturers are expected to invest nearly ₹60,000 crore in capital expenditure across the current and next fiscal years. Of this, over 40 per cent, more than ₹24,000 crore, is likely to be earmarked for expanding EV portfolios, localising supply chains and increasing production capacities for electric vehicles.
Crisil Ratings Director Anand Kulkarni said the investment trend reflects the industry’s increasing focus on preparing for a structural shift in the Indian automobile market. Automakers are strengthening their EV strategies as electric passenger vehicles gradually transition from a niche category to a mainstream mobility option.
The report noted that electric four-wheelers (E4Ws) have witnessed robust growth in recent months. Average monthly sales volumes increased by around 40 per cent to approximately 26,000 units during the three months ending May 2026. Market penetration also improved, rising to 6.1 per cent compared with the average penetration of 4.6 per cent recorded during fiscal 2026.
Despite some temporary disruptions, the long-term outlook for electric cars remains positive. Crisil Ratings Senior Director and Deputy Chief Ratings Officer Manish Gupta pointed out that the reduction in Goods and Services Tax (GST) on internal combustion engine (ICE) vehicles in September 2025 temporarily narrowed the total cost of ownership advantage enjoyed by electric vehicles. This development slowed EV growth for a brief period. However, he emphasized that the broader growth trajectory of electric cars remains intact.
The report projects that electric passenger vehicle sales could more than double to around 5 lakh units by the next fiscal year, compared with approximately 2.2 lakh units sold in the previous fiscal. As a result, EV penetration in the passenger vehicle segment is expected to reach between 8 and 10 per cent.
Several factors are driving this expansion. One of the most important is the rapid increase in available EV models. Crisil noted that the number of electric car models in India has doubled to around 20 over the past two financial years. This figure is expected to exceed 35 by the next fiscal as manufacturers prepare a series of new launches, particularly in the highly competitive sub-₹15 lakh segment.
Technological advancements have also played a crucial role. Premium electric vehicles now offer driving ranges of 500 to 700 kilometres on a single charge, while mid-range models typically provide between 300 and 450 kilometres. These improvements are helping address concerns about range anxiety, one of the key barriers to EV adoption.
In addition, EV acquisition costs have fallen by 10 to 15 per cent over the past two years due to product innovation, technological improvements and economies of scale. Better ownership economics are making electric vehicles increasingly attractive to consumers.
However, Crisil cautioned that rising EV sales may not immediately translate into stronger profitability for automobile manufacturers. High initial fixed costs, limited production scale and aggressive pricing strategies could exert pressure on operating margins in the near term. Nevertheless, strong balance sheets and stable cash flows from existing ICE vehicle portfolios are expected to help automakers maintain resilient credit profiles.
The ratings agency believes profitability will improve gradually as EV volumes increase and manufacturers benefit from greater operating leverage. It also stressed that continued policy support, expansion of charging infrastructure and further localisation of components will be essential to sustaining the momentum of electric vehicle adoption in India’s rapidly evolving automotive market.
