A new IEEFA report highlights how India’s electric vehicle growth has been driven by focused policy support, with varying impacts across vehicle types, stressing the need for tailored interventions and planned subsidy transitions.
28 May 2025 | 679 Views | By Sarthak Mahajan
Over the past decade, India’s electric vehicle (EV) landscape has been significantly shaped by targeted government subsidies and state-level policy interventions, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA). While central schemes such as FAME-I and FAME-II have helped boost EV adoption, the ...
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Over the past decade, India’s electric vehicle (EV) landscape has been significantly shaped by targeted government subsidies and state-level policy interventions, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA). While central schemes such as FAME-I and FAME-II have helped boost EV adoption, the report finds that their effectiveness has differed widely across vehicle segments.
Using data from 2014 to 2023, the report evaluates policy actions at both the central and state levels. It includes analysis of initiatives like the FAME schemes, production-linked incentive (PLI) programmes, and various state subsidies, using econometric methods to measure outcomes across five EV segments.
The electric two-wheeler (E2W) segment saw increased sales between 2019 and 2023, aligned with the implementation of FAME-II. However, this did not translate into a significant rise in E2W’s share of the overall two-wheeler market, indicating that purchase subsidies alone may not be enough to alter long-term market dynamics. The report suggests that supplementing financial incentives with investments in public charging infrastructure and a phased subsidy withdrawal plan could help drive sustained adoption.
The electric three-wheeler passenger (E3WP) segment responded positively to early interventions during FAME-I, which helped lay the groundwork for its development. The report recommends expanding financing options, supporting local manufacturing, and improving urban transport integration to promote further growth.
The electric three-wheeler cargo (E3WC) segment showed a major market shift, growing from negligible presence in 2015 to capturing nearly one-third of the market by 2023. Although statistical links between FAME support and sales growth appear modest, the report notes that supportive policies played a catalytic role. Policymakers are advised to reduce subsidies gradually while monitoring cost and adoption trends.
In the case of electric four-wheeler commercial vehicles (E4WC), FAME-I had limited impact, but the enhanced support under FAME-II facilitated some growth. However, the lack of direct car purchase incentives under the newer PM E-DRIVE scheme could affect momentum. The report recommends combining central and state-level efforts to strengthen incentives, infrastructure, and local manufacturing capacity.
For electric buses (e-buses), both FAME phases fell short of generating significant market traction. The authors propose extending support to private operators, introducing interest subvention schemes, encouraging leasing models, and investing in highway charging and parking infrastructure to improve uptake.
The report concludes that India’s EV transition will depend on recognizing the distinct needs of each vehicle category. Moving forward, it suggests that subsidies and policy frameworks should be strategically calibrated to support sustainable and segment-specific growth.