As EV adoption grows, the government has been progressively scaling back subsidies, signaling a deliberate policy shift away from fiscal dependency.
30 Jun 2025 | 4012 Views | By Kiran Murali
While the government’s demand subsidies through schemes such as FAME, EMPS, and PM E-Drive have boosted early-stage adoption of electric two-wheelers in the country and made the industry competitive, Ather Energy’s co-founder and CEO Tarun Mehta now believes the industry can continue its growth even in the absence of such ...
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While the government’s demand subsidies through schemes such as FAME, EMPS, and PM E-Drive have boosted early-stage adoption of electric two-wheelers in the country and made the industry competitive, Ather Energy’s co-founder and CEO Tarun Mehta now believes the industry can continue its growth even in the absence of such incentives.
“We have reduced our subsidy reliance. That is healthy for the industry. Now that we have reduced it, I would not want to go back and say ‘give back more subsidies.’ I think it is in a healthy place. Let the industry now work with this,” Mehta said. He noted that demand subsidies previously played a critical role in bringing down prices and boosting consumer confidence.
Currently, the government provides subsidies on the purchase of electric two-wheelers under the PM E-Drive scheme, which superseded the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) I and II schemes and the Electric Mobility Promotion Scheme.
The 2-year PM E-Drive scheme, which targets the incentivization of 24.79 lakh two-wheelers, started in October with a subsidy of ₹5,000 per kWh and a cap of ₹10,000 per vehicle. The incentive was halved to ₹2,500 per kWh in April. The scheme is set to expire on March 31, 2026.
As EV adoption grows, the government has been progressively scaling back subsidies, signaling a deliberate policy shift away from fiscal dependency. The incentives for purchasing electric two-wheelers are likely to phase out with the expiration of the current scheme. Over 1.14 lakh electric two-wheelers have received incentives in the current financial year, while over 10 lakh two-wheelers received the subsidy last year.
When asked if the industry is equipped to sustain itself without subsidies, Mehta said: “Broadly, yes. You can debate one year here and there. For instance, the total subsidy contribution to our revenue is now 3%. So, it is no longer an earth-changing number. There was a time when the subsidy was 30–40% of revenue. Those were crazy times because if the subsidy did not come one month, you could run out of money. But now at 3%, I think it's a more manageable situation.”
Meanwhile, Mehta believes that the guidelines of the Production-Linked Incentive (PLI) scheme for the auto sector need to be re-examined and should be designed in such a way that they support more startups.
The ₹25,938-crore output-linked incentive scheme was launched in 2021 to boost domestic manufacturing of advanced automotive technology (AAT) products and attract investments in the automotive manufacturing value chain. Initially, the incentives were applicable on the determined sales value from the financial year 2022–23 for five consecutive financial years till 2026–27. However, the scheme was later amended to extend the tenure by one year to March 31, 2028.
The PLI Auto scheme has two components – the Champion OEM incentive scheme for battery electric and hydrogen fuel cell vehicles in all segments, and the Component Champion incentive scheme for hi-tech and high-value components. Incentives are offered in the range of 13% to 18% for components of electric vehicles and hydrogen fuel cells, while other AAT products receive incentives between 8% and 13%. The guidelines mandate that at least 50% of a product's value be generated within the country.
Ather’s major competitors – Ola Electric, Bajaj Auto, and TVS Motor – have received approvals from the government to participate in the scheme.