BofA says India’s EV market may be entering a stronger growth phase

Rising fuel prices and a wave of new launches across automakers are driving fresh momentum in India’s electric vehicle (EV) market, according to Gunjan Prithyani, Senior Analyst-Automobiles & Auto Components at BofA Global Research.

“Clearly EVs are seeing a pretty renewed interest now,” Prithyani said in an interview with CNBC-TV18. She added that both compressed natural gas (CNG) vehicles and EVs have seen “a sharp jump in the bookings and inquiries over the last couple of months.”

What is surprising, she said, is that the current challenge for automakers is not weak demand but the ability to supply enough vehicles. “Every company is actually struggling to meet the demand,” she said, pointing to ongoing capacity expansion plans across the industry.

Prithyani believes the excitement around EVs is not only because of fuel inflation. A bigger reason is the large number of new models entering the market. “Practically every listed company now has an EV model in their dealership,” she said. Better features and more choices are helping expand the category beyond early adopters.

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However, she cautioned that EV demand is still concentrated in a few segments, mainly premium sports utility vehicles (SUVs) in passenger vehicles and scooters in two-wheelers. “Still not a massification of EVs, but certainly seeing renewed interest for now,” she noted.

Beyond EVs, Prithyani said the broader auto sector is facing two important risks — rising costs and pressure on affordability. Metal prices, including steel and aluminium, have increased sharply, creating pressure on company margins. She expects auto companies to face a difficult first half of 2026-27 (FY27) because price hikes taken so far may not fully offset the rise in raw material costs.

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At the same time, higher fuel prices and rising vehicle prices could slow demand, especially in entry-level cars and two-wheelers, where affordability matters most. While premium vehicles continue to see healthy demand, the lower end of the market remains more vulnerable.

She also warned that expectations around passenger vehicle growth may have become too optimistic. Many automakers are guiding for double-digit growth, while industry forecasts are closer to 7–8%, suggesting there could be a mismatch between expectations and actual demand.

Watch the full conversation here

Despite near-term challenges, Prithyani does not see the margin pressure as a long-term structural issue. She expects profitability to improve gradually once commodity prices stabilise and recent vehicle price hikes start flowing through over the next few quarters.



On alternative fuels, Prithyani said ethanol blending remains an important policy tool for India’s energy security goals, but aggressive targets such as E85 fuel may take time to become practical. She said large investments in engine upgrades, fuel infrastructure and customer incentives would be needed before widespread adoption can happen.

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