India’s electric vehicle (EV) start-up ecosystem witnessed a remarkable resurgence in financial year 2025, with total funding crossing the $2 billion mark for the first time. According to data from Tracxn, EV start-ups raised approximately $2.1 billion across 109 funding rounds, more than doubling from $1 billion in FY24. This rebound comes after a sharp decline in FY24, following a strong $1.9 billion in FY23.
Surge in Funding Signals Growing Investor Confidence
Industry experts attribute this spike in capital inflow to growing investor confidence across the entire EV value chain. The sector is no longer limited to vehicle manufacturing; funds are now flowing into component technology, battery innovation, EV logistics, and energy infrastructure.
“They are now willing to place bolder bets across the value chain. This broader thesis around decarbonisation and domestic innovation is what is fueling this capital influx,” said Roma Priya, founder of Burgeon Law, a Delhi-based law firm.
Factors Driving the Funding Boom
Several market dynamics are fueling the investor enthusiasm:
- Battery Costs Are Dropping: Battery prices have fallen from about $150 per kilowatt-hour to $100 over the last two years.
- Government Push for Infrastructure: Increased support for EV charging infrastructure is improving confidence in long-term growth.
- Wider Range of EV Offerings: EVs are now available at various price points, from ₹7 lakh to ₹1.5 crore, making them accessible to more consumers.
- New Product Launches: Nearly half of all monthly vehicle launches in India are now electric, reflecting rising demand and innovation in the space.
Kunal Khattar, founding partner at venture capital firm AdvantEdge Founders, notes that the industry is experiencing more diversified growth and product availability than ever before.
Shrinking ICE vs EV Price Gap
According to the International Energy Agency's Global EV Outlook 2025, the average price gap between battery electric vehicles (BEVs) and internal combustion engine (ICE) vehicles in India narrowed to less than 15% for small cars and 25% for SUVs in 2024. This narrowing gap is critical in accelerating consumer adoption.
High-Profile IPOs Boost Market Sentiment
FY25 also witnessed the public listings of major EV two-wheeler players Ola Electric and Ather Energy. These IPOs have significantly boosted investor sentiment and serve as valuation benchmarks for upcoming start-ups.
“These IPOs help institutional investors understand valuation frameworks, consumer demand and margin dynamics. More importantly, they create downstream optimism,” said Priya of Burgeon Law.
Concerns Over Funding Distribution and Deal Concentration
Despite the increase in overall funding, there is concern over the declining number of funding rounds. Tracxn data shows the number of funding rounds has dropped steadily from 157 in FY22 to 109 in FY25. Of the $2.1 billion raised in FY25, $1.1 billion came in just the last quarter through 25 deals, indicating a concentration of capital in fewer, larger rounds.
Kunal Mundra, CEO of Astranova Mobility, emphasized that while capital inflow is strong, it needs to be better distributed from seed stage to pre-IPO levels to ensure long-term health of the ecosystem.
Barriers for New Entrants
Akshay Shekhar, CEO of energy-tech start-up Kazam, which recently secured $6.2 million in Series B funding, echoed similar concerns. He pointed out that the market has shifted towards fewer, larger deals, making it difficult for early-stage companies to raise funds.
Market consolidation further complicates entry, especially in manufacturing. Ola Electric, Ather, TVS Motors, and Bajaj currently dominate over 80% of the electric two-wheeler market, while Tata Motors, Mahindra, and MG Motor lead the electric passenger vehicle space.
Changing Return Expectations Drive Sustainable Growth
Another key shift is in venture capital return expectations. Earlier, VCs sought 10–30x returns, but this has now moderated to 2–4x, helping investors plan more realistic exits.
“There are a couple of places where exits have happened. Much of it has been on Ather’s side where the return was in the range of four to five times,” said Shekhar.
The Road Ahead: Infrastructure and Capital Needs
While investor sentiment has turned positive, both Shekhar and Mundra caution that current levels of funding may not be enough to accelerate industry growth at the desired pace.
Private equity investment in EV infrastructure remains limited. Experts believe that a major boost will come when generalist VC funds begin to invest at scale, much like in artificial intelligence or quick commerce sectors.
“The real inflection point will come when large, generalist VC funds begin to participate actively,” said Mundra.
Ultimately, India’s EV sector is clearly on a strong upward trajectory, with funding momentum, government backing, and technological innovation all aligning to create a robust growth environment. However, to ensure inclusive and sustainable growth, the capital needs to be distributed more evenly across stages and sub-sectors. As the ecosystem matures, both strategic and infrastructure-focused investments will be key to unlocking the sector’s full potential.
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