Electric cars excluded from PM E-DRIVE scheme: Could dent sales further

With their exclusion now confirmed, the government’s stance is clear–lower GST for electric cars, schemes for localisation of components and batteries, and additional funds for charging stations to address range anxiety are deemed sufficient steps on its part.

No sops for electric cars

Approved by the Union Cabinet on Wednesday, the PM E-DRIVE scheme aims to support approximately 25 lakh electric two-wheelers, 3 lakh electric three-wheelers, and 14,000 electric buses through demand incentives. Automakers will be able to claim reimbursements from the government on the sale of eligible electric vehicles. Like its predecessor FAME-2, PM E-DRIVE will be administered by the Ministry of Heavy Industries.

The scheme aligns with the government’s broader push for e-mobility to reduce greenhouse gas emissions and dependency on fuel imports. It is set to play a crucial role in reaching the ambitious target of 30 per cent electric vehicle penetration by 2030.

However, unlike FAME-2, which supported 55,000 electric passenger cars, including strong hybrids, PM E-DRIVE maintains a conspicuous silence on electric cars. There is one exception–the proposal to install 22,100 fast chargers for electric four-wheelers, a subtle recognition of the lingering concerns around range anxiety.

The exclusion of electric cars from the new scheme comes after the Minister of Road Transport and Highways Nitin Gadkari said that the EV sector no longer requires subsidies at an industry event earlier this week. He cited declining lithium-ion battery costs and the growing benefit of economies of scale, predicting that within two years, the cost of petrol and diesel vehicles would be on par with EVs.

Sales dropped after FAME-2 ended

After the FAME-2 scheme ended in March, electric car sales saw a notable decline across the country. In the five months leading up to its conclusion, from November to March, electric car registrations averaged 8,158 per month, peaking at nearly 10,000 in March, according to data compiled by EVreporter. In contrast, between April and August, following the scheme’s expiration, registrations averaged 7,456 cars per month, reflecting a 9% drop. August recorded the lowest monthly sales of 2024, with just over 6,300 cars registered, a 10% decline compared to August 2023.

This muted consumer response in the absence of fiscal incentives indicates that the electric car market is not yet self-sustaining. However, a broader slowdown in overall car sales across fuel types could also partly explain the dip in EV sales.

In addition to the cost difference between internal combustion engine (ICE) vehicles and electric cars, inadequate charging infrastructure continues to be a pain point for buyers. According to the Bureau of Energy Efficiency, India has approximately 25,000 public charging stations for its 46 lakh registered EVs, across vehicle types. The current ratio of 184 EVs per charging station is much higher than in other countries actively promoting e-mobility. Moreover, many of these stations are not equipped to charge electric cars and do not offer fast charging options.

PLI schemes may help drive down costs

While direct subsidies may be off the table, other government initiatives—such as the Production Linked Incentive (PLI) schemes for auto components and advanced cell chemistry (ACC) batteries, including those used in EVs—could indirectly help lower costs for automakers by fostering economies of scale in the supply chain. Although large-scale lithium-ion battery manufacturing in India will take time to develop, the global decline in battery prices could further drive down electric car costs domestically.

Moreover, electric cars continue to benefit from a lower GST rate of 5 per cent, compared to 28 per cent on hybrid and CNG vehicles, and 49 per cent on ICE vehicles. Some states including Maharashtra, Telangana, and Tamil Nadu also exempt EVs sold in the state from paying road tax and registration charges.