India’s electric vehicle (EV) policy has entered a new phase with the recent amendments to the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme. These changes mark a strategic shift in the government’s approach to incentivising e-mobility. The scheme now adopts dual timelines for incentives across vehicle segments and reallocates resources to promote market maturity and innovation.
Extended Timelines and Budget Allocation
The PM E-DRIVE scheme maintains the March 2026 deadline for purchase incentives on electric two-wheelers, rickshaws, carts, and L5 three-wheelers. However, it extends support to electric trucks, buses, charging infrastructure, and testing agencies until March 2028. The total budget remains ₹10,900 crore but is now spread over four years instead of two. This extension reflects a calibrated approach to support segments with longer market gestation periods.
Market Impact and Segment-Specific Dynamics
Analysis shows FAME-II policy drove a ninefold market multiplier effect for electric two-wheelers. Despite this, adoption rates were modest at 4 per cent by the end of 2023. Within two-wheelers, e-scooters gained traction while e-motorcycles lagged. The scheme’s subsidy tapering, reducing from ₹5,000 to ₹2,500 per kWh in the second year, aims to encourage gradual market independence. However, e-motorcycles require sustained support to boost adoption.
Resource Reallocation Within Three-Wheelers
The scheme reallocates ₹142 crore from e-rickshaws and carts to L5 electric three-wheelers. E-rickshaw subsidies are cut by 73 per cent to ₹50 crore, limiting coverage to 39,034 vehicles. Conversely, L5 three-wheelers receive a 20 per cent increase to ₹857 crore, supporting 2,88,809 vehicles. This shift prioritises advanced three-wheelers with greater technological potential and market scope, optimising fiscal resources.
Exclusion of Commercial EVs and Private Operators
The scheme continues to exclude private e-bus operators and commercial electric cars from subsidies. Commercial four-wheelers showed the highest policy responsiveness with a 211 per cent sales growth and a 21x market multiplier under state-level incentives. Despite challenges like competition from CNG vehicles and higher upfront costs, commercial EVs represent a critical opportunity for India’s transition to clean mobility.
Role of State Governments and Infrastructure Development
With central subsidies tapering, states play an increasing role in demand-side support. States that introduced specialised financing, streamlined permits, and EV zones saw higher adoption rates. PM E-DRIVE allocates ₹2,000 crore for 72,300 public charging stations and ₹780 crore for upgrading testing agencies, addressing infrastructure and institutional gaps essential for EV growth.
Questions for UPSC:
- Critically analyse the role of fiscal incentives in accelerating electric vehicle adoption in India with suitable examples.
- Explain the challenges and opportunities in the commercial electric vehicle segment in India. How can policy reforms address these issues?
- What are the key factors influencing the success of state-level electric vehicle policies? Discuss with reference to demand-side measures and infrastructure development.
- Comment on the importance of technology innovation and market maturity in evolving electric mobility policies. How can governments balance subsidy tapering with sustained support?
