The transition towards electric vehicles (EVs) is becoming a close reality with far-reaching impact across segments. According to IBEF, India is moving on the trajectory to become the largest EV market by 2030, with an exponential rise in investments in the next 8 to 10 years. Electric vehicle sales in India, as per Vahan, reached an all-time high last year, with close to 1.94 million EVs sold—a whopping 27% surge compared to 2023. The real stars of the show? Two-wheelers, which saw over 11.48 lakh units flying off the lots—a 33% jump. Three-wheelers weren’t far behind, hitting 6.91 lakh units—that’s an 18% boost from last year. And guess what? Passenger EVs and light commercial vehicles also crushed it, growing by 22% and a mind-blowing 162%!
Owing to the government’s push for sustainability, automakers shifting their focus to EVs and consumers looking for greener mobility alternatives, the market will continue to grow at an unprecedented pace. But even as the momentum builds, a web of legal and regulatory issues are piling up—which, if left unaddressed, could drag the growth speed.
The legal challenges in the EV industry is making the EV world even more complex. The manufacturers have to stay on top of shifting safety and battery standards. Lenders have to deal with defaults and repossessions. Fleet operators face legal risks every day. And everywhere you look, outdated or unclear regulations are adding confusion, raising costs, and slowing things down.
The Hidden Cost of Red Tape
For anyone in the EV business, staying compliant is a constant juggling act. Rules around subsidies, vehicle classifications, land use for charging stations, and environmental clearances are changing all the time. A single misstep—intentional or not—can mean delays, missed incentives, or fines that eat into already tight margins.
For leasing and finance companies, it’s a bit of a minefield. It’s not just about staying compliant themselves—they’ve also got to keep an eye on what their customers are doing. And that’s not easy when the rules are all over the place, each state has its own way of doing things, and ownership laws are still kind of a grey area. Half the time, it feels like you’re navigating a maze with no map.
Challans: The Slow-Burn Problem
One issue that doesn’t get talked about enough is Traffic challans. These fines often come from simple slip-ups—and they can quietly pile up until they become a real problem. And they don’t just pinch the bottom line. Between FY20 and FY22, the two-wheeler EV segment has witnessed an increase in annual NPA from 7.7% to 11.8%. These pending challan further exacerbate the already growing NPAs. For leasing companies, they can turn into a legal headache, delaying payments, complicating recoveries, and turning small issues into big ones.
Who’s actually on the hook for these fines—the driver, the lessee, or the lender? In shared fleet models or contractor setups, things get complicated quickly. If lease agreements don’t clearly spell out the accountability, even a small fine can spiral into a legal dispute. What makes it worse is the rise of automated, camera-based enforcement. Challans are issued digitally, often with little to no warning—and settling them isn’t always straightforward. Fines start stacking up unnoticed – until they’re in the way of repossessing or reselling the vehicle.
Repossession: When Rules Get in the Way
Recovering a vehicle after a missed payment or broken lease isn’t simple. Many EVs are in poor condition, overdue for battery replacements, or tied up in legal disputes over fines or ownership. Each delay adds to the cost for the lenders or lessor increases their NPAs.
Adding to that, the lack of standardised process of repossession in disputed circumstances, unresolved challans, or other legal pendencies can drag the process for months causing financial loss to the companies or consumers.
It’s Not Just About the Vehicle
Then there’s the battery—a whole legal category of its own. Theft, damage, unclear ownership, warranty issues, and faster-than-expected wear and tear are all common. Since the battery can make up nearly 40% of the vehicle’s value, these aren’t small issues. They’re major financial risks.
On the consumer side, there’s also a gap. Buyers often don’t fully understand their rights—or don’t have clear protections. Vague warranty terms, poor after-sales service, and lack of clear dispute channels leave both customers and companies vulnerable.
What needs to Change
If we want India’s EV story to stay on track, the legal framework needs to evolve—fast. We need solutions that give real-time updates on challans, help track compliance, and resolve disputes quickly. Leasing, lending, and fleet companies should build legal readiness into how they work every day—not treat it as an afterthought.
Digital legal platforms, better documentation tools, and multilingual legal support could reduce confusion and speed things up. When legal tech is built into operations from day one, it helps prevent problems, clarify responsibilities, and protect the bottom line.
The Bottom Line
India’s EV movement isn’t just about switching to cleaner vehicles—it’s about reshaping the systems that support them. And that means building a legal backbone that can keep up with the pace of change.
The legal engine behind the EV revolution needs to be fast, flexible, and forward-thinking. Because it’s not just about reaching a greener future—it’s about making sure we get there without hitting unnecessary roadblocks.
