India’s EV sector attracted ₹2.23 lakh crore investment in 5 years, but huge financing gap remains: Report

India’s EV trajectory is growing rapidly. It is being supported by a significant surge in capital, attracting approximately ₹2.23 lakh crore in realized investments between 2020 and 2025. However, a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) warns that this is only 18% of the ₹12.5 lakh crore required to meet India’s 2030 electrification targets.

India has ambitious targets: by 2030, EV sales should comprise 30% of all private cars, 70% of commercial vehicles, 40% of buses, and 80% of two and three-wheelers.

The report found that the industry needs a cohesive investment framework. substantial investment in EV manufacturing, charging infrastructure, and supportive ecosystems. It also identified investment gaps, and outlined pathways to mobilise capital for the next phase of the nation’s electric transport transition.

Bottlenecks

The report found that despite the manufacturing momentum, public charging infrastructure remains a significant concern. Investments in this area from 2020 to 2025 represent less than 10% of the ₹20,600 crore required by the end of the decade. India's charger-to-EV ratio continues to lag behind global benchmarks set by China, the EU, and the US, primarily due to unproven business models and high initial costs.

Commercial financing is a major problem. Commercial EV borrowers currently face steep interest rates ranging from 15% to 33%, which effectively nullify the total cost of ownership advantages of switching to electric vehicles.

As the government begins to taper purchase subsidies under schemes like FAME and PM E-DRIVE, the report argues that if things continue the way they are, it will not close the ₹10.27 lakh crore investment gap, according to the report.

Most investment in manufacturing

According to the report, around ₹2.23 lakh crore was deployed across three core nodes of India’s electric transport ecosystem from 2020–2025: manufacturing capacity accounted for the bulk, followed by public subsidies and incentives, and EV charging infrastructure. 

“While ₹2.23 lakh crore is a significant capital mobilisation in just five years, it represents only about 18% of the ₹12,50,000 crore required by 2030,” says co-author Subham Shrivastava, Climate Finance Analyst at IEEFA. “Mobilising the remaining ₹10,26,881 crore by 2030 will require systemic financing reforms.” 

For manufacturing investments, internal accruals accounted for the largest share at ₹1,59,701 crore, followed by debt (₹ 36,738 crore) and equity (₹6,455 crore), according to the report.

The report identified electric three-wheelers as the dominant segment, accounting for nearly 78% of all investments in the last five years. This is because of commercial-scale operations, and a fragmented market featuring over 800 registered manufacturers.

However, the investment landscape is shifting. Data from 2024-2025 revealed a switch toward electric four-wheelers, particularly in the premium car and SUV segments, found the report. Announced investments for four-wheeler manufacturing reached approximately ₹1.32 lakh crore. This signals that there will be increased and sustained demand for passenger vehicles in the Indian EV market over the coming years.

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

Moving beyond subsidies

The study suggested the creation of an integrated financing platform to systematically de-risk the sector. This would include partial credit guarantees, residual value protection to address concerns about battery degradation and resale, and battery-as-a-Service (BaaS) models to lower upfront costs.

The report suggests that development finance institutions like the Small Industries Development Bank of India (SIDBI) and India Infrastructure Finance Company Limited (IIFCL) should anchor these efforts to unlock low-cost bank financing.

The trajectory of investment flows will depend heavily on the ease of vehicle financing, according to the report. Reducing the cost of lending to 8–12% would be a helpful step. “The binding constraint is not a lack of capital in the system—it is how EV risk is priced,” says Shrivastava. “When lenders remain uncertain about battery performance, residual values, and cash—flow stability, that uncertainty gets reflected in higher interest rates.”