40% surge in electric four-wheeler volumes signals gear shift beyond West Asia: Crisil Ratings

Electric four-wheeler (E4W) adoption is gathering pace, with average monthly volumes rising by 40% to around 26,000 units during the three months ending May, 2026 – an all-time high compared with the 2026 financial year average, according to Crisil Ratings.

While recent fuel price increases, triggered by the West Asia conflict, have improved the cost-competitiveness of electric vehicles (EVs), the growth trajectory is supported by structural drivers such as longer driving ranges, improving cost economics vis-à-vis internal combustion engine (ICE) vehicles and wider product choices. Consequently, annual E4W sales volumes are expected to more than double by next financial year, it said.

While the widening E4W portfolios would drive sizeable investments this financial year and next, healthy free cash flows from existing ICE portfolios, along with stronger balance sheets, would continue to support the credit profiles of original equipment manufacturers (OEMs).

Running cost

The running cost of ICE vehicles increased 7% to 8% this May due to a spike in fuel prices. This has improved the relative total cost of ownership (TCO) of E4Ws by a good 300 basis points. Given the lingering geo-political uncertainties and if fuel prices are hiked further, this advantage would be reinforced.

However, the strong demand momentum for E4Ws predates the fuel price surge. In the three months through May, E4W penetration rose to 6.1%, up from the 2026 financial year average of 4.6%, supported by already favourable TCO.

EV acquisition cost declined by 10 to 15% over the past two financial years, aided by product innovation and scale efficiencies. Furthermore, expanding product portfolios have increased consumer choice across segments, which is positive for sales.

Structural drivers

There are structural drivers to the growth of E4Ws, such as the fact that the number of E4W models has doubled over the past two financial years. Several new launches are expected in the below ₹15 lakh segment by next financial year. Technological advancements are addressing a key barrier to adoption — range anxiety.

Premium models now offer 500 to 700 km per charge, while mid-range vehicles deliver 300–450 km. Extended battery warranties of eight to 10 years and innovative ownership structures such as battery-as-a-service are easing concerns about upfront costs and long-term reliability, Crisil Ratings said.

Challenges remain

Despite the progress, many challenges remain. While public charging infrastructure has scaled up substantially in recent years, it remains highly urban-centric and uneven across regions. The proposed tightening of corporate average fuel efficiency (CAFE) norms from the next financial year could push manufacturers to accelerate their EV strategies, boosting adoption over the medium term.

In the road ahead, the pace of localisation, expansion of charging infrastructure, and continuity of policy support, such as low GST and road tax exemptions, would be critical for sustained adoption of EVs, it said in its release.