With subsidies now cut by half, manufacturers expect that they will need to increase prices to transfer the extra costs onto customers.
The Union government has advanced the PM E-Drive subsidy funds intended for over 120,000 electric three-wheelers from April to the end of the fiscal year 2025 (FY25). This preemptive move is in response to the depletion of the allocated subsidy for the current fiscal year, which occurred much earlier than expected. The Ministry of Heavy Industries (MHI) made this decision after consultations with the Society of Indian Automobile Manufacturers (SIAM) last week. Despite a recent reduction in the subsidy amount from ₹50,000 to ₹25,000 per vehicle, the government opted to maintain the incentive program to avoid a complete halt. The funds utilised this fiscal will be deducted from next year’s budget, with expectations that FY26’s allocation will also be consumed by its first quarter.
The PM E-Drive scheme, launched in October 2024 following the five-year FAME-II scheme, has played a significant role in the proliferation of electric three-wheelers in India, particularly for last-mile connectivity and small-scale logistics. However, with the scheme’s annual cap for FY25 nearly reached by early November, manufacturers and dealers were left uncertain about the future.
The industry has expressed concerns over the abrupt decision-making process affecting their supply chains and business planning. The Ministry of Heavy Industries is slated to issue a formal notification shortly about the subsidy advancement.
While the government’s decision to bring forward the FY26 subsidies has alleviated some immediate concerns, it highlights the challenge of matching the scheme’s pace with the increasing demand for electric mobility. This situation compels the government to strike a balance between fiscal limitations and the promotion of electric vehicles as an environmentally friendly and cost-effective transportation alternative.
