E4W Sales Momentum Builds As Structural Drivers Outweigh Fuel Price Impact: Crisil

Electric four-wheeler (E4W) adoption in India is accelerating, with average monthly volumes rising around 40% to nearly 26,000 units during the three months ended May 2026, according to a report by Crisil Ratings. The agency said the growth reflects a broader structural shift in the passenger vehicle market rather than a temporary response to higher fuel prices.

The recent increase in petrol and diesel prices, linked to geopolitical tensions in West Asia, has improved the total cost of ownership (TCO) proposition of electric vehicles. Crisil estimates that running costs for internal combustion engine (ICE) vehicles increased by 7-8% in May, widening the relative TCO advantage of E4Ws by around 300 basis points.

However, the ratings agency noted that demand momentum for electric cars was already strengthening before the fuel price surge. E4W penetration reached 6.1% in the three months through May, compared with an average of 4.6% in FY2026. Lower acquisition costs, product innovation and a wider range of available models have contributed to the growth.

“E4W volumes are expected to more than double to ~5 lakh units by next fiscal from ~2.2 lakh units in the last fiscal, increasing penetration to 8–10%,” said Manish Gupta, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings.

According to the report, the number of electric car models available in India has doubled to around 20 over the past two financial years. Several new launches in the sub-Rs 15 lakh segment are expected by next fiscal, potentially increasing the total model count to more than 35. At the same time, advances in battery technology have pushed driving ranges to 500-700 km in premium models and 300-450 km in mid-range vehicles, helping address consumer concerns around range anxiety.

Extended battery warranties of up to 10 years and ownership models such as Battery-as-a-Service are also reducing concerns around upfront costs and long-term reliability, Crisil said.

The report estimates that automakers will invest more than Rs 24,000 crore in EV-related activities over FY2027 and FY2028, accounting for over 40% of the industry’s projected capex outlay of around Rs 60,000 crore during the period. Investments are expected to focus on portfolio expansion, localisation of supply chains and scaling up production capacity.

Despite the increased spending, Crisil expects OEM credit profiles to remain supported by healthy balance sheets and cash flows generated from their ICE vehicle businesses. However, it cautioned that rising EV volumes could weigh on margins in the near term because of limited scale, high fixed costs and competitive pricing strategies. Margin improvement is expected as production volumes increase and operating leverage improves.

Looking ahead, Crisil said the pace of charging infrastructure expansion, localisation efforts and continuation of policy support measures such as lower GST and road tax exemptions will play a key role in sustaining the growth of India’s electric passenger vehicle market.