India's electric vehicle transition faces financing and environmental challenges

India is experiencing a significant shift toward electric vehicle (EV) adoption, particularly in the two-wheeler, three-wheeler, and commercial sectors. While EV registrations are rising, the transition faces distinct financial and environmental challenges.

Financially, the growth of the EV market may depend on specialized non-banking financial companies (NBFCs). Traditional banking models often struggle with the unique risks associated with EVs, such as uncertain resale values due to evolving battery technology and the specific cash-flow profiles of commercial drivers. Specialized lenders may be better equipped to underwrite these assets based on their specific economic characteristics.

In regions like Kerala, the surge in electric mobility presents a complex environmental picture. Although EV registrations rose by 28.5 percent in 2025, the state is adding new vehicles to its roads faster than it is replacing older internal combustion engine models. Experts suggest that for electrification to effectively reduce congestion and pollution, it must be integrated into a broader transport strategy that includes improved public transit and renewable energy usage.