India’s e-bus penetration may reach 30% by 2029-30, driven by policy support, lower operating costs, rising sales and improved payment security for operators.
By Ved Yadav
E-bus penetration may reach 30% by 2029-30.
Current penetration stands at around 7%.
E-bus sales crossed 5,400 units in 2025-26.
Over 80,000 e-buses targeted under government schemes.
Lower running costs are driving adoption.
India’s electric bus market is expected to grow rapidly in the coming years, with e-bus penetration in the medium and heavy vehicle segment projected to reach around 30% by 2029-30, compared with about 7% currently, according to rating agency ICRA.
The expected growth will be driven by continued government support, lower operating costs, improving payment security and favourable economics for public transport operators.
India’s medium and heavy electric bus sales have increased significantly in recent years. Sales rose from just 37 units in 2017-18 to 5,412 units in 2025-26. More than 2,000 e-buses were sold in the first four months of FY2026-27, showing the growing demand for electric public transport.
So far, Delhi, Maharashtra, Karnataka, Gujarat and Telangana have together accounted for around 75% of e-buses deployed in the country.
Government programmes have played a major role in supporting this growth. Initiatives such as FAME-I, FAME-II, the National Electric Bus Programme, PM-eBus Sewa and PM E-Drive collectively target the deployment of more than 80,000 electric buses.
These programmes have received a combined budgetary allocation of around ₹1 trillion up to 2027-28.
Although electric buses require a higher initial investment than conventional buses, their lower running costs can make them financially attractive over their operating life.
ICRA estimates that a 12-metre air-conditioned electric bus has a total cost of ownership of around ₹39 per km. This compares with approximately ₹51 per km for a diesel bus and ₹48 per km for a CNG bus.
According to ICRA, subsidies and lower operating expenses can help offset the higher upfront capital cost of electric buses.
The agency also estimated that fully electrifying the 1.5 lakh-bus fleet operated by Public Transport Authorities (PTAs) over the next decade could require a capital outlay of around ₹1.5 trillion.
“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 (GCC) model has become the preferred structure for many e-bus projects. Under this model, an operator owns and operates the buses, while the Public Transport Authority pays the operator a fixed fee based on kilometres travelled.
ICRA said the daily scheduled running of its rated e-bus projects has exceeded the assured contracted kilometres. Energy consumption has also remained broadly in line with expectations, while cost overruns have stayed below 10% of initial project costs.
However, project execution and timely payments remain important challenges.
ICRA noted that some PTAs have delayed payments to operators. Delays have also been reported in establishing escrow accounts and handing over depots. In several projects, commercialisation has been delayed by around six months to one year.
The agency also highlighted risks linked to battery costs, technology changes, geopolitics and supply chains. Battery replacement alone accounts for around 25-30% of the total bus cost.
The industry also remains dependent on imported cells, batteries and other components, making projects vulnerable to global supply chain disruptions.
To reduce payment-related risks, the Payment Security Mechanism (PSM), routed through Convergence Energy Services Limited and supported by a Direct Debit Mandate arrangement with the Reserve Bank of India, could provide greater payment security. A dedicated PSM fund has also been capitalised to support timely payments to operators.
India’s electric bus sector has attracted both strategic and financial investors. Companies and investment platforms linked to KKR, Tata Motors, Ashok Leyland, JSW, IFC and NIIF have shown interest in the segment.
ICRA expects declining battery costs, lower total cost of ownership and increasing environmental concerns to further support demand.
Overall, the combination of government-backed programmes, improving economics and stronger payment security could accelerate the shift towards electric public transport. If these factors continue to support the market, e-bus penetration in India’s medium and heavy vehicle segment could rise from the current 7% to around 30% by 2029-30.
Also Read: Porter Deploys 10,000th Electric Truck in Delhi, Targets 4X EV Growth in Five Years
India’s electric bus market is entering a strong growth phase, with penetration expected to rise to around 30% by 2029-30. Government support, lower operating costs and improving payment security are encouraging adoption. However, timely payments, project execution, battery costs and supply chain risks remain key challenges. If these issues are managed effectively, e-buses could play a major role in transforming India’s public transport system over the coming years.
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