India’s electric vehicle story has entered a more serious phase. The early question was simple: can subsidies make people buy electric two-wheelers, three-wheelers, buses and cars? The answer is increasingly yes. But the harder question now is different: can India build the full industrial ecosystem behind those vehicles?
That is where India’s EV policy puzzle begins.
In 2025, India’s EV market crossed a significant milestone, with around 2.3 million EV sales, accounting for roughly 8% of all new vehicle registrations, according to Vahan-based industry data cited by IESA. Electric two-wheelers remained the backbone of adoption with about 1.28 million units, while electric three-wheelers contributed around 0.8 million units. Electric four-wheelers, though growing, remained smaller at about 1.75 lakh units.
“India has proved that EV demand can be created. The next test is whether India can manufacture the batteries, components, chargers and supply chains that make EV adoption sustainable.”
The government’s current policy structure shows that India understands this shift. The PM E-DRIVE scheme, launched by the Ministry of Heavy Industries, has a total support outlay of ₹10,900 crore and covers electric two-wheelers, three-wheelers, ambulances, trucks, buses, charging infrastructure and testing agency upgrades. It is not merely a buyer subsidy scheme; it is positioned as a broader electric mobility push.
But the design also reveals the tension. India still needs demand incentives to keep adoption moving, especially in price-sensitive two-wheeler and three-wheeler segments. At the same time, the country cannot build a globally competitive EV industry by subsidising vehicle purchases alone. The real strategic battle is now in batteries, charging, power systems, component localisation and state-level industrial execution.
From Subsidy-Led Adoption to Ecosystem-Led Growth
India’s first EV phase was largely about affordability. FAME and later PM E-DRIVE helped reduce upfront costs, which mattered in a market where consumers compare EVs not only with petrol vehicles but also with financing costs, resale value, battery replacement risk and charging convenience.
Under PM E-DRIVE, the largest allocation is for electric buses, with ₹4,391 crore earmarked to support 14,028 e-buses. Charging infrastructure receives ₹2,000 crore, while electric two-wheelers receive ₹1,772 crore for a targeted support base of more than 24.79 lakh vehicles.
This matters because buses and public transport are not just vehicle categories; they are infrastructure-led mobility systems. A private scooter buyer may charge at home, but an electric bus network requires depots, high-capacity chargers, grid planning, route economics, payment security and city-level transport coordination.
“The EV market can be pushed by subsidies. The EV ecosystem has to be built through infrastructure, manufacturing depth and institutional coordination.”
That is why India’s EV policy cannot be judged only by monthly sales numbers. Sales prove adoption. Ecosystem strength is proven by how much value India captures inside the country.
The Battery Problem: India’s Most Critical EV Dependency
The battery remains the most important and expensive component in an electric vehicle. Without domestic battery cell manufacturing, India risks becoming an assembly market: importing high-value cells and components while adding limited domestic value.
The government’s Production Linked Incentive scheme for Advanced Chemistry Cell battery storage was approved with an outlay of ₹18,100 crore to establish 50 GWh of domestic ACC manufacturing capacity. The scheme is explicitly designed to support electric mobility and battery storage, with emphasis on giga-scale manufacturing and domestic value addition.
However, implementation is still a work in progress. As of 31 December 2025, the government reported that 40 GWh of capacity had been awarded to four beneficiary firms, but only 1 GWh had been installed. The Ministry also acknowledged challenges such as limited technology availability, skilled manpower gaps, import dependence for critical equipment, and non-availability of upstream materials such as cathode active materials, anode active materials and electrolytes.
That single data point captures the core of India’s EV puzzle. Vehicle sales are rising faster than the upstream manufacturing base.
“India’s EV ambition will remain incomplete if the country imports the most valuable part of the vehicle and localises only the final assembly.”
Battery manufacturing is not just about setting up factories. It requires chemistry expertise, mineral access, refining capacity, cell design, quality control, recycling, safety standards and long-term offtake from vehicle manufacturers. China’s EV dominance was not built only on consumer incentives; it was built on control over large portions of the battery and component value chain.
India is trying to avoid that dependency, but the execution gap is visible.
Charging Infrastructure: Growing Fast, Still Not Enough
Charging is the second major pillar of the EV ecosystem. India has made progress, but the network remains uneven.
The government reported 29,151 EV charging stations installed across India over the previous five years, including 8,805 fast charging stations and 20,346 slow charging stations. The Ministry of Power’s 2024 charging guidelines also made EV charging station setup an unlicensed activity, allowing private entrepreneurs to participate, while promoting interoperability and including battery-swapping stations.
That is a positive policy signal. But charging availability is not just about the number of stations. It is about where they are located, whether they work, what speed they provide, whether payment systems are interoperable, whether highways are covered, and whether apartment residents can charge conveniently.
For electric two-wheelers and three-wheelers, home and workplace charging can support early adoption. But for electric cars, intercity travel, commercial fleets, logistics vehicles and buses, public and semi-public charging becomes essential.
“A charger on paper does not solve range anxiety. A reliable, discoverable, interoperable and well-maintained charging network does.”
India’s EV market will therefore need a stronger link between urban planning, electricity distribution companies, highways, real estate, parking operators and private charging providers. Otherwise, adoption will remain concentrated in cities and states where infrastructure is already mature.
The State-Level Race: EV Policy Is Becoming Industrial Strategy
One of the most important developments in India’s EV journey is the rise of state-level competition. EV manufacturing is not being shaped only in New Delhi. It is being shaped in Tamil Nadu, Maharashtra, Gujarat, Karnataka, Haryana, Uttar Pradesh and other states competing for factories, component suppliers, charging corridors and export hubs.
Tamil Nadu’s EV push is a useful example. VinFast inaugurated its electric vehicle assembly plant at SIPCOT Industrial Park in Thoothukudi in August 2025, calling India the world’s third-largest automobile market and highlighting the country’s strategic role in its global EV plans.
Haryana has also positioned itself as an EV and advanced manufacturing hub, highlighting logistics, skilled manpower, industrial townships, Japanese industrial collaboration and efforts to integrate MSMEs into global supply chains.
This is where India’s EV policy becomes more than a transport policy. It becomes a jobs policy, manufacturing policy, export policy and technology policy.
“The state that wins EV manufacturing will not be the state that announces the biggest slogan. It will be the state that connects land, power, ports, suppliers, skills, testing facilities and policy stability.”
India’s opportunity is not only to sell EVs domestically. It can become a manufacturing base for emerging markets in Asia, Africa and the Middle East. But that requires supplier ecosystems, not just headline factory announcements.
Global Automakers: Import Duty Cuts With Local Manufacturing Conditions
India has also tried to attract global EV makers through a policy that reduces import duties for companies committing to local manufacturing. The scheme allows eligible companies to import up to 8,000 EVs per year at a reduced customs duty of 15% for vehicles priced at $35,000 or more, provided they invest at least ₹4,150 crore to set up manufacturing in India within three years.
This policy is politically and economically sensitive. Domestic automakers want protection for the investments they have already made. Global automakers want lower entry barriers before committing capital. Consumers want better products and lower prices. The government wants technology, jobs and local value addition.
That balancing act is difficult.
If the policy becomes too generous, India risks becoming an import market for premium EVs. If it becomes too restrictive, global manufacturers may delay India entry. The right outcome lies in a middle path: limited import access linked to firm manufacturing, localisation, supplier development and export commitments.
India’s Segment Reality: Two-Wheelers and Three-Wheelers Lead, Cars Lag
India’s EV transition is not following the Western pattern. In the United States and Europe, electric cars dominate EV conversation. In India, the real mass-market transition is happening first in two-wheelers, three-wheelers and buses.
India remained one of the world’s strongest markets for electric two-wheelers and three-wheelers in 2025, while electric three-wheelers continued to show deep penetration in domestic sales. India also ranked among the largest global electric bus markets, supported by public procurement and PM E-DRIVE-linked initiatives.
This is actually a strength. India’s daily mobility is heavily dependent on scooters, motorcycles, autorickshaws, delivery fleets and buses. Electrifying these categories can reduce urban pollution, lower running costs and create high-volume domestic demand for batteries, motors, controllers and charging solutions.
But the risk is that India may build a large low-cost EV market without building enough high-value technology depth.
“The question is not whether India can sell millions of EVs. The question is whether India can own the technology layers underneath those EVs.”
What India Must Solve Next
India’s EV policy now needs a second-generation mindset.
First, battery localisation must move from policy award to actual capacity. The gap between awarded ACC capacity and installed capacity needs urgent attention through technology partnerships, mineral strategy, skilled workforce development and upstream component manufacturing.
Second, charging infrastructure must become more reliable and user-centric. India needs not only more chargers but better uptime, common payment systems, real-time availability data, highway coverage and apartment-level charging solutions.
Third, state policies must converge with national strategy. States should compete, but not in isolation. Industrial corridors, ports, battery clusters, recycling zones, testing centres and skill universities should be aligned to national EV priorities.
Fourth, India must support component MSMEs. A real EV ecosystem includes motors, power electronics, thermal systems, battery management systems, connectors, software, telematics and safety testing. Without supplier depth, India will remain dependent on imported kits.
Fifth, EV policy must link with power policy. More EVs mean more electricity demand, load management requirements and renewable integration opportunities. Smart charging, time-of-day tariffs and grid readiness must become mainstream.
The Road Ahead
India has already moved beyond the question of whether EVs have a future. The market has momentum, consumers are more aware, manufacturers are investing, and the government has created multiple policy levers across demand incentives, manufacturing support, charging infrastructure and global investment attraction.
But the next phase will be less forgiving. Subsidies can trigger adoption, but they cannot compensate forever for weak supply chains, battery import dependence, unreliable charging or fragmented state execution.
India’s EV ambition will succeed only if the country builds the full ecosystem: from minerals to batteries, from chargers to grids, from factories to suppliers, from state policies to export strategies.
“The winner in the EV race will not be the country that sells the most vehicles for one year. It will be the country that controls the ecosystem for the next decade.”
For India, the EV policy puzzle is therefore not about choosing between market creation and ecosystem building. It is about recognising that the first is no longer enough without the second.
