Slow EV Growth Doesn't Deter Global Push Into India's Car Market: Moody's

The pace of vehicle electrification remains slow, constrained by limited infrastructure and high costs, even as both domestic and foreign carmakers gear up for long-term opportunities in the market, according to Moody's.

While the country lags behind global peers in EV adoption, its vast consumer base, improving affordability and policy support make it a crucial battleground for both domestic and foreign carmakers eyeing long-term growth, Moody's said in a note on Tuesday.

Currently, battery electric vehicles account for less than 2% of total car sales in India, far below the government’s target of 30% by 2030. The slow uptake is attributed to limited charging infrastructure, high upfront costs, and consumer hesitancy.

However, Moody's expects automakers to invest heavily to change that. Industry leaders have pledged over $10 billion in EV-related investments through 2030. These funds are earmarked for localised battery production, new EV models, and the development of charging infrastructure — moves vital for reducing costs in India's price-sensitive market.

Moody's suggests that India's path to electrification can mirror China's, where a robust EV ecosystem and localised manufacturing drove rapid adoption. India's government is also incentivising local production through schemes like the production-linked incentive initiative. While these investments may strain near-term cash flows, they are essential for ensuring competitiveness and sustainability in a shifting global automotive landscape.

Despite slow adoption rates, India is projected to see one of the highest compound annual growth rates in BEV sales across Asia. By 2030, BEVs could make up 12–15% of total car sales, Moody's said. Affordability remains a key hurdle, but rising incomes and greater access to credit are improving market conditions.

Foreign carmakers, including Honda and Nissan, are adjusting their strategies to suit India’s unique EV landscape. While Honda will begin with plug-in hybrids before fully transitioning to BEVs, others are focusing on scaling up local operations. India also continues to serve as an export hub, with companies like Suzuki and Hyundai producing vehicles for markets across Asia and Africa.

Car sales in India are projected to grow at a compound annual growth rate of 3.5% to reach 5.1 million units by 2030 — the fastest rate in Asia, according to Moody's report. The current low penetration of 44 vehicles per 1,000 people underscores the untapped potential in the world's third-largest auto market. As two-wheeler users increasingly shift to cars, particularly entry-level models, and as incomes rise, demand is expected to remain strong.

The Indian market is also experiencing a shift from budget small cars to larger, premium vehicles like SUVs, reflecting rising affordability and changing consumer aspirations. This trend is lucrative for manufacturers due to higher margins on premium models.

Despite electrification challenges, India remains central to global automakers' strategies, both as a high-growth market for traditional vehicles and a manufacturing hub, the brokerage said in its report.

Recent trade agreements, such as with the UK, and tariff reductions are likely to further open the market, especially for premium imports. India’s blend of rising domestic demand and export potential ensures its continued prominence in the global automotive landscape.