India sold 2.66 million electric vehicles in FY 2025-26 (DPIIT / SIAM). That is not a forecast or a projection — that is the current reality. The government has 16.29 lakh EVs supported under FAME II, with Rs 912.5 crore deployed for public charging infrastructure (Ministry of Heavy Industries, June 2025). For a manufacturing entrepreneur, the single most important fact in the EV manufacturing business in India right now is this: the market is live, it is growing at double-digit rates, and the government has committed to keeping incentives flowing through PM E-DRIVE and SMEC schemes.
India's electric vehicle transition is heavily weighted toward two-wheelers (59% of sales) and three-wheelers (35% of sales) — products that are eminently manufacturable at MSME scale. The e-rickshaw, which has driven UP's EV penetration to a 17% national share with over 300,000 units (2024 data), is arguably one of the most accessible electric vehicle business ideas in India for a first-time MSME entrepreneur.
At a Glance: Starting an Electric Vehicle Manufacturing Business in India
India EV Sales FY 2025-26: 2.66 million units (DPIIT / SIAM data)
India EV Market Value (2025): USD 3.71 billion, projected USD 191.04 billion by long-term forecast (IBEF, 2025)
FAME II Support (as of June 2025): 16.29 lakh EVs supported; Rs 912.5 crore allocated for charging infrastructure (Ministry of HI&PE)
E-2W Market Penetration (2024-25): ~58.18% — highest penetration among EV categories (JMK Research)
Minimum Investment: Rs 50 lakh–Rs 5 crore for e-rickshaw assembly unit; Rs 5-50 crore for e-2W or e-3W manufacturing
Key Manufacturing States: Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Rajasthan
Key Licence: Type Approval from ARAI/ICAT; FAME II/PM E-DRIVE eligibility registration; BIS certification for lithium-ion batteries
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growing at double-digit rates, and the government has committed to keeping incentives flowing through PM E-DRIVE and SMEC schemes.
India's electric vehicle transition is heavily weighted toward two-wheelers (59% of sales) and three-wheelers (35% of sales) — products that are eminently manufacturable at MSME scale. The e-rickshaw, which has driven UP's EV penetration to a 17% national share with over 300,000 units (2024 data), is arguably one of the most accessible electric vehicle business ideas in India for a first-time MSME entrepreneur.
Why Electric Vehicle Manufacturing in India Is the Right Business at the Right Time
The government's commitment is unprecedented in Indian manufacturing policy history. FAME II allocated Rs 10,000 crore over its lifetime. PM E-DRIVE targets 24.79 lakh e-two-wheelers and 3.2 lakh e-three-wheelers. PLI incentives for automotive and battery manufacturing jumped over 700% (Cornell Business analysis, 2025). PM e-Bus Sewa allocated Rs 1,310 crore in FY 2026 budget, up from Rs 500 crore in FY 2025. This is not a single scheme — it is a decade-long policy architecture.
GST at 5% on EVs is a permanent consumer pull factor. India reduced GST on electric vehicles to 5% (from 12% for comparable conventional vehicles), making EVs structurally cost-competitive. This tax advantage compounds with fuel savings and maintenance cost differences to create a compelling total-cost-of-ownership argument for buyers — which directly drives manufacturer demand.
Export opportunity is opening as India's EV ecosystem matures. DPIIT signed an MoU with Ather Energy on July 29, 2025, to boost India's EV and manufacturing startup ecosystem. VinFast (Vietnam) committed USD 2 billion for an EV project in Tamil Nadu in January 2024. Global OEMs are treating India not just as a consumption market but as a manufacturing base — creating component and sub-assembly supply chain opportunities for Indian MSMEs.
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Government Signal: FAME II & PM E-DRIVE Data (Ministry of Heavy Industries)
As of June 30, 2025: 16.29 lakh EVs supported under FAME II including 14.35 lakh e-2W, 1.65 lakh e-3W, 22,644 e-4W. Rs 912.5 crore allocated for 8,885 public charging stations out of 9,332 sanctioned. PM E-DRIVE (successor to FAME) — budget surged 114% in 2025, targeting 24.79 lakh e-2W and 3.2 lakh e-3W. (Source: IBEF / Ministry of Heavy Industries)
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EV Market Demand Data and Sales Statistics
India's EV sales crossed 2 million units in calendar year 2024 (JMK Research), a 27% year-on-year growth. E-2W penetration reached approximately 58.18% — meaning more than half of electric vehicle sales are in the two-wheeler segment. E-3W passenger vehicles grew 15.23% YoY. E-3W cargo grew 49.22% — the fastest-growing EV sub-category. E-car sales rose 6.87% YoY but penetration remained at 2.43%. This data confirms that e-rickshaw business opportunity in India and e-2W manufacturing are the highest-volume, fastest-growing accessible segments for MSMEs.
Uttar Pradesh leads state-wise EV sales with 17% national share (over 300,000 units in 2024, primarily e-rickshaws). Maharashtra and Karnataka follow with strong e-2W dominance. The government estimates annual EV sales could reach 17 million units by 2030, with overall EV penetration growing eightfold from current levels.
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Calendar Year / FY
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India EV Sales (Million Units)
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Growth YoY
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Key Driver
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CY 2022
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~1.0 (est.)
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Base period
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FAME II launch, GST reduction
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CY 2023
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~1.5 (est.)
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~50% growth
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E-2W boom, e-3W expansion
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CY 2024
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~2.0
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27% growth
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Market maturity, charging infra
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FY 2025-26
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2.66
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Strong growth
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PM E-DRIVE, SMEC scheme
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2027 (est.)
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~5.0
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Doubling trajectory
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Fleet electrification, delivery EVs
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2030 (govt. target)
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17.0
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Government stated target
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30% vehicle fleet electrification
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2035 (est.)
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20.0+
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~20 million (industry estimate)
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Mainstream EV adoption
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Sources: JMK Research (CY 2024 data); IBEF EV industry report, 2025; DPIIT/SIAM (FY 2025-26); Government of India 2030 target per Ministry of Heavy Industries. Estimates from 2027 based on stated trajectories.
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Market Scale Signal: India's EV Penetration Data
E-2W penetration reached approximately 58.18% in FY 2025-26 — over half of all electric vehicles sold in India are two-wheelers. E-3W cargo saw the fastest growth at 49.22% YoY. Uttar Pradesh alone has 300,000+ EVs, primarily e-rickshaws. These numbers confirm that the largest and most accessible EV manufacturing opportunity for MSMEs is in the two-wheeler and three-wheeler categories. (Source: JMK Research, Ministry of Heavy Industries)
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Government Data and Policy Framework for the EV Sector
India's EV ecosystem is one of the most actively supported manufacturing sectors in the country. The Ministry of Heavy Industries administers FAME II and PM E-DRIVE. The Ministry of New & Renewable Energy supports battery storage manufacturing. DPIIT coordinates PLI for Advanced Chemistry Cell (ACC) batteries. This multi-ministry support structure has created the most comprehensive government scheme for EV manufacturing in India in the country's industrial history.
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Government Scheme / Data
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Detail
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Source
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FAME II total sanctioned budget
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Rs 10,000 crore (INR 100 billion)
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Ministry of Heavy Industries
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FAME II EVs supported (June 2025)
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16.29 lakh units total
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Ministry of Heavy Industries, June 2025
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PM E-DRIVE demand incentive
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Rs 5,000/kWh for FY 2024-25; Rs 2,500/kWh for FY 2025-26
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Ministry of Heavy Industries
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PM E-DRIVE e-bus allocation
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Rs 4,391 crore for 14,028 e-buses
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Ministry of Heavy Industries
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PLI for ACC batteries
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DPIIT; budget up 700%+ for battery manufacturing
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Cornell Business / DPIIT
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New EV Policy (2024)
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USD 500 million outlay for global investment, tied to local manufacturing
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Ministry of Heavy Industries
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GST on EVs
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5% (vs 12-28% for ICE vehicles)
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Ministry of Finance / GST Council
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SMEC Scheme (FY 2026)
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Rs 12 crore (doubled from FY 2025) for electric passenger car manufacturing
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Ministry of Heavy Industries
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Source: Ministry of Heavy Industries (FAME II, PM E-DRIVE, SMEC, PM e-Bus Sewa); DPIIT (PLI for ACC batteries); Ministry of Finance (GST rate data); IBEF EV Industry Report, 2025.
Government Schemes Available for EV Manufacturers
PM E-DRIVE (successor to FAME II): Demand incentive of Rs 5,000 per kWh for e-2W and e-3W registered in FY 2024-25; Rs 2,500 per kWh in FY 2025-26. Targets 24.79 lakh e-2W and 3.2 lakh e-3W. Rs 500 crore allocated for e-ambulances.
PLI Scheme for ACC Batteries (DPIIT): Rs 18,100 crore PLI for Advanced Chemistry Cell battery manufacturing. Indian manufacturers who produce ACC batteries domestically qualify for 5-year incentives. Enables component localisation.
SMEC (Scheme to Promote Manufacturing of Electric Passenger Cars): Rs 12 crore in FY 2026 to encourage adoption and domestic manufacturing of electric passenger cars. Doubled from FY 2025.
Startup India (DPIIT): DPIIT's July 2025 MoU with Ather Energy signals active support for EV manufacturing startups. DPIIT recognition provides tax holiday and patent support for EV technology innovators.
State-level — UP EV Manufacturing Policy: Uttar Pradesh, the largest state EV market (17% national share), has a dedicated EV manufacturing policy with capital subsidies, land allocation, and utility rate concessions for EV manufacturers. Rajasthan and Karnataka have similar state-level EV manufacturing support schemes.
Import-Export Opportunity in EV Manufacturing
India's new EV policy (2024, USD 500 million outlay) specifically aims to attract global EV manufacturers while tying incentives to local manufacturing content requirements. This creates a supply chain opportunity for Indian component manufacturers — battery cells, motors, controllers, chargers, body panels — that must be sourced domestically by any manufacturer seeking FAME or PLI incentives under the Phased Manufacturing Programme (PMP).
On the export side, Indian EV manufacturers are beginning to export to ASEAN, Africa, and South Asia. Ola Electric, Bajaj Auto (Chetak), and TVS Motor have begun EV exports. The government's target is to make India a global EV manufacturing hub — component export is the near-term opportunity, with assembled EV export to developing markets growing through the decade.
Import challenge: India relies heavily on China for rare earth metals used in EV motors and batteries. China's export restrictions in April 2025 have created supply disruptions, with Bajaj announcing potential production halts in August 2025. India is promoting local magnet production and alternative sourcing — this creates an opportunity for domestic rare earth processing ventures.
Major Indian Companies in the EV Sector
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Company
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EV Segment
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Note
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Tata Motors
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Electric passenger vehicles (Nexon EV, Tiago EV)
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53%+ share in electric passenger vehicle segment
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Ola Electric
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E-2W (S1 range)
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India's largest EV 2-wheeler manufacturer; Ather MoU partner
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TVS Motor
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E-2W (iQube), e-3W
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Pan-India distribution; strong brand in scooter segment
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Bajaj Auto
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E-2W (Chetak), E-3W (RE EV)
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Legacy OEM with strong E-3W presence
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Hero Electric
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E-2W (affordable commuter segment)
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Volume player in mass-market e-scooter space
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Mahindra Electric
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E-4W (XUV400), commercial EVs
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Large OEM with strong SUV EV and cargo EV line
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YC Electric (YCTPL)
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E-rickshaw, E-3W cargo
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Large-scale e-rickshaw manufacturer; UP-based
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Kinetic Green
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E-3W, e-cargo, e-rickshaw
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MSME-scale to mid-size; strong in last-mile delivery EVs
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Growth Horizon: EV Market Forecast to 2035
India's government has set a target of 17 million EV sales by 2030 — an eightfold increase from 2024 levels. The market is expected to maintain its current growth momentum driven by rising fuel prices, consumer awareness, and policy support. By 2035, industry estimates project annual EV sales of 20 million or more, covering 30-40% of all new vehicle sales. For a manufacturer of e-rickshaws or electric scooters established today with proper type approval and BIS certification, the 2035 outlook represents a decade of unbroken demand growth backed by government policy certainty.
Battery costs — the largest component in EV manufacturing — continue to decline globally. As India's PLI-funded ACC battery manufacturing scales up (targeting 50 GWh of capacity), domestic battery costs will fall, making Indian EVs more cost-competitive and improving manufacturer margins. The 2025-2035 window is the critical period to build manufacturing capabilities before the market fully matures.
Mentor's Note: Type Approval Is Non-Negotiable — Start It Early
Every electric vehicle sold in India must have type approval from ARAI (Automotive Research Association of India) or ICAT (International Centre for Automotive Technology). This process takes 3-9 months for most vehicle categories. Start your type approval application alongside your manufacturing setup — not after it. Vehicles without type approval cannot be registered, cannot qualify for FAME incentives, and cannot be sold. Many first-time EV entrepreneurs have lost 6-12 months of revenue by starting this process too late.
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Practitioner Q&A: E-Vehicle and E-Rickshaw Manufacturing Business
Q1. Is e-rickshaw assembly the most accessible entry point into EV manufacturing?
Yes. E-rickshaw assembly from CKD (Completely Knocked Down) kits requires Rs 50 lakh to Rs 2 crore in setup and uses simpler technology than e-2W or e-4W. The UP market alone absorbs tens of thousands of e-rickshaws monthly. However, assembly-only businesses have thin margins — as soon as volumes allow, localise key components (battery packs, controllers) for better margin.
Q2. How do FAME II / PM E-DRIVE incentives benefit manufacturers vs buyers?
FAME II and PM E-DRIVE are demand-side incentives — they reduce the price paid by the buyer, which increases demand for your product. As a manufacturer, you benefit indirectly through higher volume and through the Phased Manufacturing Programme (PMP) incentives that reward local component sourcing. Ensure your vehicles meet PMP norms to qualify for FAME/PM E-DRIVE — vehicles not meeting PMP do not qualify for government subsidies.
Q3. What type approval is needed to manufacture and sell e-rickshaws in India?
E-rickshaws must comply with AIS:048 (rev 2) performance and safety standards and require type approval from ARAI or ICAT. Additionally, BIS certification (IS 16897) for lithium-ion battery packs is mandatory. Vehicles must meet AIS:138 (EMF safety), AIS:100 (EV safety), and CMV Rules registration requirements. Engage a type approval consultant alongside your manufacturing team — the regulatory pathway is navigable but requires specialist knowledge.
Q4. Which EV component manufacturing offers the best MSME opportunity?
Battery pack assembly (from imported cells), EV controllers, DC-DC converters, onboard chargers, and regenerative braking systems are accessible MSME component opportunities. Battery Management Systems (BMS) development requires electronics expertise but commands high margins. All of these qualify for PLI incentives if they meet local content requirements.
Q5. How does the PLI for ACC batteries apply to small manufacturers?
PLI for ACC batteries targets at least 10 GWh scale — beyond MSME capacity. However, smaller manufacturers can supply components and sub-assemblies to PLI-approved large battery manufacturers. The supply chain opportunity is significant: electrode manufacturing, cell assembly jigs, thermal management components, and battery housing are all opportunities for MSME vendors to these larger PLI recipients.
Q6. What is the best state to set up an e-rickshaw manufacturing plant?
Uttar Pradesh — the largest e-rickshaw market in India (300,000+ units in 2024) — is the strongest choice for market proximity. UP's EV manufacturing policy offers capital subsidies and utility rate concessions. Rajasthan and Madhya Pradesh are also attractive with lower land costs. For technology-intensive EV manufacturing, Maharashtra (Pune automotive cluster) and Karnataka (Bengaluru technology ecosystem) offer better talent and component supply chain access.
Q7. Can foreign companies enter Indian EV manufacturing under the New EV Policy 2024?
Yes. The New EV Policy (2024, USD 500 million outlay) allows foreign EV manufacturers to import at reduced duty if they commit to local manufacturing within 3 years with a minimum investment of USD 4,150 crore. This is creating an inflow of technology and manufacturing partnerships — Indian MSME component suppliers who align with these global OEMs gain access to advanced technology and global supply chain standards.
Q8. Is there a GeM procurement opportunity for EVs?
Yes. Government departments are increasingly procuring electric vehicles — e-bikes for postal services, electric vehicles for police, e-buses for state RTCs, and e-ambulances (Rs 500 crore allocated under PM E-DRIVE). GeM registration as an EV supplier gives direct government procurement access without middlemen.
Q9. What are the regulatory requirements for EV lithium battery manufacturing in India?
Lithium-ion battery packs must be BIS-certified under IS 16897 (2018). Environmental compliance for battery manufacturing includes CPCB hazardous waste management for lithium processing and battery recycling obligations under Battery Waste Management Rules 2022. Extended Producer Responsibility (EPR) is mandatory for battery manufacturers — plan your end-of-life battery collection system from day one.
Q10. How do rare earth supply disruptions affect Indian EV manufacturers?
China's April 2025 rare earth export restrictions affected motors using neodymium-iron-boron (NdFeB) magnets. Bajaj announced potential production halts in August 2025. The government is promoting rare earth processing domestically and exploring alternative motor architectures (ferrite magnets, synchronous reluctance motors). EV manufacturers should diversify magnet suppliers and explore ISED (India Science and Engineering Discovery) funding for alternative motor R&D.
The Bottom Line
India's EV revolution is not a projection — it is a market reality. With 2.66 million units sold in FY 2025-26, government support through FAME II, PM E-DRIVE, and PLI schemes, and a government target of 17 million units by 2030, the structural demand for EV manufacturing in India is as firm as any in global industry. The fastest entry for a new MSME manufacturer is e-rickshaw assembly in Uttar Pradesh or e-2W component manufacturing in Pune or Bengaluru. Get your type approval from ARAI/ICAT, register under Udyam, apply for PM E-DRIVE eligibility, and align your product specifications with PMP norms. The EV decade in India has just begun, and the market is wide open for serious manufacturers who get certified, localise components, and build quality systems that international standards demand.
References
1. Ministry of Heavy Industries, Government of India — FAME II scheme data (June 2025): 16.29 lakh EVs supported, Rs 912.5 crore charging infrastructure; PM E-DRIVE scheme targets and demand incentive rates; PM e-Bus Sewa budget allocation; SMEC scheme.
2. DPIIT (Department for Promotion of Industry and Internal Trade), Ministry of Commerce — DPIIT-Ather Energy MoU (July 29, 2025); PLI for Advanced Chemistry Cell batteries (Rs 18,100 crore); New EV Policy 2024 (USD 500 million outlay); EV sales data FY 2025-26 (2.66 million units).
3. IBEF (India Brand Equity Foundation), Ministry of Commerce — EV Industry Report 2025: India EV market value USD 3.71 billion (2025); government 2030 sales target 17 million units; state-wise EV sales data.
4. JMK Research, 2024 — India EV sales CY 2024 crossed 2 million; E-2W penetration 58.18%; E-3W cargo growth 49.22%; segment-wise EV growth data.
5. Ministry of Finance, Government of India — GST Council notification: EV GST at 5%; ICE vehicle GST comparison data.
6. ARAI (Automotive Research Association of India) / ICAT (International Centre for Automotive Technology) — AIS:048, AIS:138, AIS:100 type approval standards for electric vehicles; BIS IS 16897 battery certification framework.
