EV: Why India must shift gears to infrastructure financing

The electric vehicle (EV) transition in India has been quite steady in the last few years; however, a slight dip is noticeable recently. Based on estimates, EV sales have crossed roughly 2.2 mn units in 2025, witnessing a market penetration of 7.6 per cent as against a market penetration of 1 per cent in 2019. The market has seen major uptake in the electric 2W and 3W categories; however, commercial fleets, electric cars and buses are gradually catching up. The Indian government has been quite persistent in its efforts by putting the right policies in place, first through FLAME and now through PM E-DRIVE. India has announced ambitious targets — EVs are expected to have a market penetration of 30 per cent by 2030, which basically means a 22 per cent increase from the present rate in the next 5 years. Based on NITI Aayog estimates, India’s EV transition is likely to unlock $200bn by 2035, generating over 10 mn jobs across manufacturing, charging infrastructure and related services. Needless to mention, market penetration will depend heavily on EV adoption, which in turn will be driven by enabling infrastructure across different segments and geographies.

The present EV space has been largely driven by investments in vehicle manufacturing rather than in infrastructure development. As of now, the space has been majorly dominated by private corporate capital, particularly from vehicle manufacturers financing manufacturing capacity and product development through internal accruals and balance sheet investments. This is followed by venture capital and growth equity investors who have supported EV start-ups and battery technology platforms, while banks and NBFCs are increasingly financing vehicle purchases, especially 2W and 3W. Public capital has majorly played a catalytic role through policy incentives, subsidies and concessional funding supported by multilateral institutions. However, these investments have largely remained uneven across the ecosystem: vehicle manufacturing has attracted significant private capital vis-à-vis financing for charging infrastructure, grid integration and large-scale fleet electrification, which remains limited due to uncertain utilisation rates, long payback periods, and land and other infrastructure requirements. Revenues depend heavily on local EV adoption patterns, electricity tariffs and policy stability. At the same time, charging infrastructure is fundamentally location-dependent: the viability of a station depends on access to strategically located urban land such as parking areas, transport hubs, commercial centres or logistics depots. Securing such land often involves high leasing costs, complex municipal approvals and short tenure agreements that do not match the financing horizons preferred by investors.

The nature of the financing challenge is evolving. In metropolitan regions such as Delhi-NCR, charging and battery-swapping networks for 2Ws and 3Ws have expanded significantly in recent years. Private operators and start-ups have begun building dense networks, particularly for delivery fleets and shared mobility services. This suggests that, in some large metropolitan markets, infrastructure financing for smaller EV segments may gradually be becoming more viable. However, this progress remains uneven. Charging infrastructure remains a significant challenge in tier-2 and tier-3 cities. Limited demand visibility, smaller fleet sizes and weaker distribution networks make infrastructure deployment in these regions financially challenging. In addition, access to suitable land for charging stations - whether municipal parking spaces, commercial complexes or transport nodes — remains limited in many smaller cities, where local planning frameworks for EV infrastructure are still evolving. Without targeted interventions, charging networks may remain concentrated in tier-1 cities, slowing EV adoption elsewhere. Based on NITI Aayog analysis, the scale of infrastructure required to support EV transition and energy efficiency goals in India is immense. India presently has roughly 25,000 public EV charging stations but might require nearly 2.9 million by 2035 to support EV growth. EV infrastructure in India remains well below the global benchmarks. The country has about 52 public charging points per mn people, vis-à-vis 580 in the United States and over 2,500 in China. These numbers illustrate the magnitude of investment required to sustain large-scale electrification.

Estimates highlight the scale of the broader investment challenge. Sector experts suggest that India’s electric transport transition could require hundreds of billions of dollars in cumulative investment over the coming decades, including both vehicles and supporting infrastructure. Mobilising such capital will require moving beyond pilots toward a more mature financing ecosystem.

Moving forward, India’s EV policy needs to shift from primary EV adoption to enabling infrastructure financing. Immense opportunities exist to unlock capital from domestic financial intermediaries and international MDBs. The need of the hour is a holistic policy which will enable the financing framework.

First, perceived risks related to utilisation, demand, tariff structures and site-level economics such as land costs and tenure security need to be addressed by policymakers.

Targeted credit guarantees - partial or first loss - can help attract institutional investments. Concessional capital from DFIs could absorb early-stage utilisation risks and improve credit ratings for EV infrastructure projects. But such mechanisms should remain temporary. Overreliance on concessional finance risks distorting market signals, thereby crowding out commercial discipline. BF must therefore taper as the market matures and asset performance data improves.

Second, financial innovations through aggregation models, as demonstrated by CESL. By aggregating demand across multiple cities, standardising contracts, and offering stronger payment assurance mechanisms, CESL significantly improved project bankability and reduced costs. The same principle can be extended to EV infrastructure. Infrastructure finance works best at the portfolio level, where aggregating charging stations diversifies risk and can enable capital-market financing through securitisation or green asset-backed securities.

Third, financial regulators also have an important role to play. RBI retains several developmental policy tools that could accelerate the sector’s growth. Explicit PSL recognition for EV infrastructure, calibrated risk weights for EV asset pools, and clearer securitisation frameworks could help lower financing costs and attract institutional capital.

Fourth, municipal and state-level financing mechanisms will be critical for scaling electrified public transport. Cities could leverage green municipal bonds and PPPs to finance electric bus fleets and charging depots. Equally important will be city-level planning frameworks that allocate public land such as bus depots, metro stations and municipal parking facilities for EV charging infrastructure.

Finally, public finance should be deployed strategically to support infrastructure expansion in underserved regions.

Targeted viability gap funding, concessional credit lines or blended finance platforms could help crowd in private investment in tier-2 and tier-3 cities where demand remains uncertain but long-term potential is significant.

India’s EV transition is entering a decisive phase. The ambition is strong and the market interest is visible. The challenge now is no longer simply adoption; it is institutionalisation. Whether the next decade delivers truly scalable electrification will depend less on how many vehicles are sold and more on whether India can design the financial system capable of sustaining them.

The writer is is a sustainable finance expert with 15+ years’ experience in research across climate finance, innovative finance, and green investment frameworks ; views are personal