India E-Bus Penetration To Rise To Around 30% By 2029-30: ICRA

India’s electric bus penetration in the medium and heavy vehicle segment is expected to rise to around 30% by 2029-30 from 7% currently, according to rating agency ICRA. The agency attributed the expected increase to continued policy support and favourable cost economics.

E-bus sales in the medium and heavy segment increased from 37 units in 2017-18 to 5,412 units in 2025-26, while more than 2,000 units were sold in the first four months of 2026-27. Delhi, Maharashtra, Karnataka, Gujarat and Telangana together accounted for around 75% of e-buses deployed so far.

The segment has been supported by government programmes including FAME-I, FAME-II, the National Electric Bus Programme, PM-eBus Sewa and PM E-Drive. These schemes collectively target the deployment of more than 80,000 e-buses, backed by a cumulative budgetary allocation of around Rs 1 trillion until 2027-28.

E-Bus Economics And Public Transport Electrification

Despite a higher upfront cost, ICRA estimates the total cost of ownership for a 12-metre air-conditioned e-bus at around Rs 39 per km, compared with around Rs 51 per km for a diesel bus and Rs 48 per km for a CNG bus. The agency said lower operating costs offset the higher capital expenditure after accounting for subsidies.

If the entire 1,50,000-bus fleet operated by Public Transport Authorities were fully electrified over the next decade, the capital outlay could reach around Rs 1.5 trillion, ICRA said.

“The e-bus segment presents a large market opportunity for original equipment manufacturers (OEMs), operators, and investors, anchored on strong policy support and favourable cost economics,” said Jitin Makkar, senior vice president and group head – corporate ratings, ICRA.

The Gross Cost Contract model has emerged as the preferred structure for e-bus projects, under which an operator owns and operates the buses while the PTA pays a per-kilometre fee. ICRA said the daily scheduled running of its rated e-bus projects has exceeded the assured contracted kilometres, while energy consumption has remained in line with expectations and cost overruns have been contained below 10% of initial project costs.

Payment Security And Execution Risks

ICRA said the credit profiles of e-bus projects remain dependent on execution discipline and timely payments from PTAs. Some authorities have cleared operator dues with delays, while delays have also been reported in setting up escrow accounts and handing over depots. Commercialisation delays of six months to one year have been observed in several projects.

The agency also identified battery costs, technology changes and geopolitical and supply chain risks as factors affecting the segment. Battery replacement accounts for around 25-30% of the bus cost, while reliance on imported cells, batteries and components leaves projects exposed to supply chain risks.

ICRA said the Payment Security Mechanism, routed through Convergence Energy Services Limited and backed by a Direct Debit Mandate arrangement with the Reserve Bank of India, could mitigate counterparty payment risks. A dedicated PSM fund has also been capitalised to support timely payments to operators.

The agency added that the segment has attracted strategic and financial investors including KKR, Tata Motors, Ashok Leyland, JSW, IFC and NIIF-backed platforms. It said declining battery costs, favourable total cost of ownership and environmental considerations are expected to support demand.