Can PM E-DRIVE Scheme Accelerate Electric Vehicles in India

The Indian electric mobility market is expected to expand significantly in the coming 5-6 years, with a 30% to 40% growth rate.

According to the e-Vahan portal, as of February 2025, there were 5.675 million electric vehicles (EVs) registered in India and more than 389.7 million registered vehicles.

There are many reasons for these high EV numbers.

The technological innovations have significantly reduced costs and improved performance, making electric vehicles accessible, especially electric 2-wheelers (e-2Ws) and electric 3-wheelers (e-3Ws), which constitute a major portion of vehicles on Indian roads.

Further, advanced battery solutions, availability of charging networks and local production of EV components and vehicles have made electric vehicles in India even more accessible.

One of the significant pushes has come from the Indian government with policies such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, which provided incentives for increasing EV adoption.

The first phase of the FAME scheme was introduced in 2015, followed by the second phase in 2019 for three years, which was later extended till March 2024. Through FAME scheme, the government offered financial incentives such as subsidies to manufacturers and reduced tax rates to consumers.

While decarbonizing the transport sector is a factor, another major reason the government is pushing electric vehicles in India is to reduce its dependency on oil imports.

Crude oil consumption and imports form a significant chunk of the Indian government’s imports. The country’s crude import bill reached US$113.9 billion in the first 10 months of FY25 compared to $110.9 billion in FY24.

Increasing penetration of electric vehicles in India can provide a breakthrough as the country looks to explore alternatives for its energy demands.

Therefore, in September 2024, within 6 months of the conclusion of FAME 2, India’s government announced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme to promote electric mobility in the country.

The financial allocation for the PM E-DRIVE scheme is Rs 10,900 cr (~US$1.2 bn) till 31st March 2026. The scheme aims to achieve its objective in the following manner:

Faster Adoption of EVs: The scheme seeks to accelerate the uptake of electric vehicles by reducing their upfront costs through demand incentives.
Charging Infrastructure: A significant focus is on establishing a robust charging infrastructure network to build confidence among EV users and support the growing EV fleet.
EV Manufacturing Ecosystem: The scheme promotes the development of a local EV manufacturing ecosystem, ensuring long-term sustainability and reducing reliance on imports.
Emphasis on Public Transport: Prioritising EVs for public transport and commercial use aims to provide environmentally friendly transportation options for the masses, thereby reducing overall emissions.
Reduced Reliance on Fossil Fuels: The scheme intends to decrease dependence on fossil fuels and lower emissions from the transportation sector by promoting electric mobility.

The implementation of the PM E-Drive scheme is expected to benefit both consumers and manufacturers.

For Consumers: Demand incentives lower the initial cost of EVs, making them more accessible for EV buyers.
For Manufacturers: Demand incentives directly stimulate the demand for EVs, boosting sales and production volumes. The Phased Manufacturing Programme (PMP) supports the localisation of EV components, fostering domestic manufacturing capabilities.

The steps taken under the scheme to support and incentivize the adoption of Electric Vehicles (EVs) across different regions of India are as follows:

Financial Support: Demand incentives of Rs 5,000 per kWh in FY 2024-25 and Rs 2,500 per kWh in FY 2025-26 are provided for e-2W and e-3W categories. These incentives are capped at 15 percent of the ex-factory price.
E-Buses: The scheme allocates Rs. 4,391 crore for the rollout of 14,028 e-buses.
Prioritising Scrapping: For grants to deploy e-buses, cities/states that procure new e-buses after scrapping old STU buses through authorised RVSFs are to be preferred.

The PM E-DRIVE Scheme emphasises providing affordable and environment-friendly public transportation options for the masses. The scheme ensures accessibility and affordability of electric vehicles through targeted subsidies and demand incentives for e-2Ws and e-3Ws on a pan-India basis, which are largely used in rural and semi-urban areas.

The government through this scheme also wants to facilitate the growth of the electric vehicle industry and create job opportunities in the sector in the following manner:

Domestic Manufacturing: The Phased Manufacturing Programme (PMP) mandates progressive localisation of EV components, boosting domestic manufacturing and reducing import dependence.
Charging Infrastructure Development: Investment in charging infrastructure creates opportunities for businesses and entrepreneurs in installation, maintenance, and operation.
Incentives for local manufacturing: A minimum of 50% domestic value addition in manufacturing of EV charger is a boost for local component manufacturers.

Apart from the PM-E-DRIVE Scheme, the government’s other supportive policies include the PLI scheme to boost manufacturing and the vehicle scrappage to boost demand of electric vehicles in India.

Green Hydrogen Bus

Wrapping Up

While India’s electric vehicle numbers might look impressive in isolation, the EV penetration in India is about 7.5 percent, far below the target. In 2021, “the Government of India has set an ambitious target of 30% EV penetration by 2030.”

Overall, India’s endeavour to electrify its transportation is a monumental task that requires different stakeholders to collaborate across sectors. The public and private sector are required to work together.

The central government through various schemes has demonstrated that it is willing to go the extra mile. To further drive electric vehicles in India, different state governments need to usher reforms and policy actions as well.

The governments should also ensure that they integrate electric mobility systems in all forms of transport systems in their control, such as public buses, defense vehicles, waste management fleet, government vehicles, etc.

If successful, India’s electric vehicle initiatives could serve as a blueprint for other countries striving to decarbonise their transport system, promising cleaner air and a healthier environment for future generations.