The Indian Electric Vehicle (EV) market is expected to grow in the range of 35-40 per cent CAGR till the year 2027, according to a report on Wednesday.

The report by Niveshaay, which manages the Green Energy smallcase (a portfolio of stocks, which will benefit from the renewable energy sector development), showed that EV sales volume in India could touch around 3-4 million units by 2025, and 10 million by 2030.

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Currently, the Indian EV market is concentrated on the two and three-wheeler EV segment, which accounts for about 80 per cent of its vehicle market.

“The Indian government is aiming to boost local manufacturing and reduce import dependency. It has introduced Production Linked Incentive (PLI) schemes and reduced customs duties on critical minerals to boost local manufacturing,” said Arvind Kothari, smallcase Manager and Founder of Niveshaay.

“The balanced approach to policy support and market development is facilitating India to emerge as a remarkable contender in the global EV landscape, despite challenges like limited charging infrastructure,” he added.

The new report further stated that EVs are expected to penetrate the market with approximately 10-15 per cent of new vehicle sales in India (including two-wheelers, three-wheelers, and passenger vehicles), driven by government incentives, rising fuel prices, and increased consumer awareness.

By the year 2030, annual EV sales are projected to surpass 10 million units, with substantial growth in the deployment of electric buses, commercial vehicles, and private cars. EVs could represent 30-40 per cent of new vehicle sales in the market.

With more than two million public charging stations projected nationwide, the study predicts a strong EV Infrastructure, the report said.

The increase in EV Adoption, infrastructure, as well as manufacturing, can also be attributed to growth in Budget allocations for the EV sector.

From Rs 10,000 crore allocated in FY2019-20 (FAME II scheme), it has increased to 19,744 crore (for Green Hydrogen mission) and 2,908 crore (continued FAME II Support) in FY2023-24.

Faster Adoption and Manufacturing of Electric Vehicles (FAME) was introduced in 2015 to encourage the adoption of electric and hybrid vehicles by offering upfront incentives on purchase.

The Union Budget 2024-25 has allocated Rs 2,671.33 crore under the FAME scheme, primarily to cover remaining liabilities from FAME II.

In addition, the government has introduced the Rs 500 crore Electric Mobility Promotion Scheme (EMPS) to boost electric two- and three-wheelers.

The increased PLI Scheme for automobiles and auto components to Rs 3,500 crore and the exemptions in customs duty on lithium, cobalt, and other rare minerals to reduce battery production costs, via the Union Budget, make electric vehicles more affordable.

Driven by key government initiatives like the FAME and the EMPS scheme, India is poised to become a major player in the global EV market, specifically amongst the emerging markets.

While China dominated with 60 per cent of global EV sales as of 2023, India’s large population and urbanisation are driving demand for affordable electric mobility.

In contrast, the US and Europe, with EV penetration rates of around 7 per cent and 14 per cent respectively as of 2023, are focused on passenger vehicles and infrastructure development, the report said.