Published By: Gurpreet

World EV Day: Can India’s Electric Vehicle Sector Sustain Without Government Subsidies?

While EV sales have seen a boom in Western markets, it continues to rise in India, albeit very slowly.

The world celebrates World EV Day today on September 9, and it cannot be ruled out that India has made massive progress in adopting electric vehicles (EVs). However, there is still a long way to go for it despite EVs being touted to be long-term solutions in the auto market across the globe. For almost a decade, the Indian Government has been advocating for a move towards EVs.

Nitin Gadkari, Union Minister of Transport and Highways, has not only been recommending adoption of EVs at a mass level but has also been encouraging OEMs in India to locally manufacture EVs and not depend on imports to meet the demand.

In 2015, the government also came up with the Faster Adoption of Manufacturing of Electric Vehicles (FAME) scheme, with an aim to promote the adoption of EVs in India via incentives and subsidies. While FAME 1 gave a push, it was FAME 2.0, launched in 2019, that led to wide scale adoption Of EVs across segments.

What Were FAME 2.0 Subsidies?

For those caught unaware, FAME 2.0 offered incentives for electric two-wheelers, three-wheelers, and four-wheelers. It led to a surge in EV sales, particularly in the two-wheeler segment, with companies like Ola Electric, Ather Energy, and Bajaj Auto launching affordable electric scooters. However, when several benefits provided to OEMs and buyers under the FAME 2.0 scheme were scrapped in March 2024, it took everyone off guard. Since then, there has been a significant decline in EV sales across segments.

At the time, Gadkari stated that the subsidies were not required for electric vehicle (EV) manufacturers, since there is already a growing demand for EVs. He further reiterated that India EV manufacturers have reached a point of sustainability.

Can EVs Survive Without Subsidies?

Well, for now, it remains unpredictable if EVs can survive without subsidies in India in the longer run. It is more so because the market share for EVs in India is less than 10%, and there’s a long way to go.

The cutting down of FAME 2.0 incentives did have several implications:

Increased Costs: Without the subsidies, there’s a higher upfront cost for EVs, and it becomes a less affordable market like India.

Lower Consumer Demand: With increased prices, the consumer demand has dampened and led to slowdown in sales.

Industry Challenges: The withdrawal has been a difficult move for suppliers, charging infrastructure providers, and battery manufacturers.