Key facts
- Indian automakers plan to invest over Rs 24,000 crore in electric vehicles by FY28.
- This EV investment represents more than 40% of the total Rs 60,000 crore capex planned for FY27-FY28.
- Key drivers for EV growth include increased model availability, improved driving range, and better ownership economics.
- Electric four-wheeler volumes are projected to more than double to approximately 5 lakh units by next fiscal.
- Despite near-term margin dilution, the long-term growth trajectory for EVs remains strong.
Indian passenger vehicle manufacturers are set to channel over Rs 24,000 crore into electric vehicle (EV) expansion by fiscal year 2028, according to a report by CRISIL Ratings. This significant allocation, representing more than 40% of the total planned capital expenditure of approximately Rs 60,000 crore for fiscal years 2027 and 2028, underscores a major structural shift in the Indian automotive market. The investment push is driven by the accelerating adoption of electric four-wheelers (E4Ws), which is gaining momentum despite existing challenges in charging infrastructure and near-term profitability. Automakers are focusing on expanding their EV portfolios, localizing supply chains, and increasing production capacities to meet growing demand. According to CRISIL, average monthly E4W volumes have seen a substantial rise, increasing by around 40% to approximately 26,000 units in the three months ending May 2026. This has led to an increase in E4W penetration to 6.1% from 4.6% in fiscal 2026. The report projects E4W volumes to more than double to around 5 lakh units by the next fiscal year, from approximately 2.2 lakh units in the last fiscal. Several factors are contributing to this growth, including a rapid increase in the availability of EV models, with the number doubling to about 20 over the past two fiscals and expected to exceed 35 by next fiscal, particularly in the sub-Rs 15 lakh segment. Improvements in driving range, with premium EVs now offering 500-700 km and mid-range models providing 300-450 km, are also addressing consumer range anxiety. Furthermore, EV acquisition costs have decreased by 10-15% over the last two fiscals due to product innovation and scale efficiencies. However, CRISIL cautions that the rise in EV sales may not immediately translate into improved profitability for automakers. The report notes that while credit profiles are expected to remain resilient due to strong balance sheets and steady cash flows from existing internal combustion engine (ICE) portfolios, increasing E4W sales could be margin-dilutive in the short term. This is attributed to limited scale, high initial fixed costs, and competitive pricing. Margins are anticipated to expand gradually as volumes increase and operating leverage improves. Key factors that will remain critical for sustaining EV adoption include the pace of supply chain localization, the expansion of charging infrastructure, and the continuity of supportive government policies, such as low Goods and Services Tax (GST) and road tax exemptions.