More than Rs 24,000 crore of the Rs 60,000 crore capital expenditure planned by passenger vehicle makers over this fiscal and next is expected to be directed towards electric vehicle expansion, signalling that automakers are increasingly preparing for a structural shift in India’s car market, according to a Crisil Ratings report released on Thursday.
The report said electric four-wheeler (E4W) adoption is gathering pace despite challenges around charging infrastructure and near-term profitability, with manufacturers stepping up investments in portfolio expansion, supply-chain localisation and EV production capacity.
“Of the overall capex outlay of ~Rs 60,000 crore expected over this fiscal and next, over 40 per cent is estimated to be for portfolio expansion, supply chain localisation, and scaling EV production,” Anand Kulkarni, Director, Crisil Ratings, said in the report.
The ratings agency said the investment push comes as electric passenger vehicles move beyond being a niche segment and gain traction on the back of improving ownership economics, wider product choices and technological advancements.
According to the report, average monthly E4W volumes rose around 40 per cent to about 26,000 units during the three months ended May 2026, while penetration increased to 6.1 per cent from the fiscal 2026 average of 4.6 per cent.
Crisil Ratings Senior Director and Deputy Chief Ratings Officer Manish Gupta said the long-term growth outlook for electric cars remains strong despite temporary disruptions.
“The reduction in goods and services tax (GST) on ICE vehicles during September 2025 temporarily narrowed the TCO advantage of E4Ws and moderated their growth for a few months. Nevertheless, their long-term growth trajectory remains intact,” Gupta said.
“E4W volumes are expected to more than double to ~5 lakh units by next fiscal from ~2.2 lakh units in last fiscal, increasing penetration to 8-10 per cent,” he added.
The report identified three key drivers behind the growth – a rapid increase in model availability, improvement in driving range and better ownership economics.
It noted that the number of E4W models has doubled to around 20 over the past two fiscals and could exceed 35 by next fiscal as more launches are planned in the sub-Rs 15 lakh segment. Premium EVs now offer 500-700 km range per charge, while mid-range models provide 300-450 km, helping address consumer concerns over range anxiety.
At the same time, EV acquisition costs have declined by 10-15 per cent over the past two fiscals due to product innovation and scale efficiencies, the report said.
However, Crisil cautioned that higher EV sales may not immediately translate into stronger profitability for automakers.
“Despite this, the credit profiles will remain resilient, given strong balance sheets and steady cash flows from existing ICE portfolios. But rising E4W sales could be margin-dilutive for OEMs in the near term due to limited scale, high initial fixed costs, and competitive pricing strategies,” said Anand Kulkarni, Director, Crisil Ratings.
“Margins should expand gradually as volumes ramp up and operating leverage improves,” he added.
The report said the pace of localisation, expansion of charging infrastructure and continuity of policy support, including low GST and road tax exemptions, will remain critical for sustaining EV adoption in the years ahead.
(ANI)
