Electric 3-wheeler subsidies for FY25 halt as sales hit cap

The annual cap for number of subsidised e-three wheelers under the PM E-Drive scheme has almost been reached for this fiscal, and the Centre has decided not to extend the subsidies beyond the cap for FY25.

In a letter to OEMs (original equipment manufacturers) dated 8 November, the ministry of heavy industries (MHI) has written that once the scheme’s target is met, no additional e-three wheelers will be eligible for subsidies. Mint has seen a copy of the letter.

The letter mentions that against a target of 80,546 units for FY25, 79,974 units of e-three wheelers—including e-rickshaws (for passengers) and e-carts (for goods transport)—had already been sold as of 7 November. 

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The scheme will only be renewed next fiscal, but with a lower subsidy per vehicle. Currently, incentives of up to ₹50,000 can be availed per e-three-wheeler. That is set to halve to ₹25,000 per vehicle from 1 April 2025.

Emailed queries sent to the heavy industry ministry were unanswered till press time.

Impact of no more subsidy in FY25

Electric vehicle manufacturers expect the government’s decision to push up prices of these popular, environmentally friendly vehicles by about 15-18% of their ex-showroom price, which could dampen their sales momentum, leading industry executives Mint spoke to said.

According to the industry, electric three-wheelers have been widely adopted in India as an affordable, sustainable option for last-mile connectivity, often relying on government subsidies to remain cost-competitive.

“Government initiatives like Fame, EMPS, and PM E-Drive have been pivotal in driving the electrification of the e-3W (L5) segment, which has achieved a significant 22% penetration in the current financial year," Suman Mishra, managing director and chief executive officer of Mahindra Last Mile Mobility told Mint, adding that the discontinuation of PM E-Drive risks disrupting this momentum, potentially slowing consumer adoption, and causing an abrupt decline in sales.

“This would have a ripple effect, impacting manufacturers, dealers, and other stakeholders. To maintain this progress, we believe that a seamless transition in subsidy support is crucial," Mishra said.

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Other OEMs, like Bajaj Auto and Piaggio, are similarly concerned. Amit Sagar, executive vice president and business head at Piaggio, said that vehicles already in dealer stock would become more costly without subsidies, adding a significant financial burden.

“We will incur a huge amount of cost…about 15-18% more in price," he said, adding that passing on this cost to customers could be inevitable, adding that it would be a challenge to sell vehicles already in dealer stock at higher prices, as dealers had bought inventories when subsidies were in effect.

“Customers and financiers prefer stability, and abrupt changes make it harder for them to plan," Sagar said. “Through SIAM, we will requesting a smoother transition, acknowledging that the target has been met and that the government has notified us." SIAM refers to industry association Society of Indian Automobile Manufacturers.

Good run so far

India’s electric three-wheeler market has grown rapidly over the past few years, driven by government incentives and with some help from rising fuel costs and increasing environmental awareness.

The PM E-Drive scheme, launched on 1 October 2024, has been instrumental in making these vehicles more affordable, especially for small business owners and last-mile delivery operators.

However, the annual cap on incentives for FY25 has been met much earlier than anticipated, raising questions about the scheme’s design and its ability to accommodate the growing demand for electric three-wheelers.

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Individual automakers have made representations to the heavy industries ministry to consider revising the cap or implementing a more flexible incentive structure that can better match the rapidly growing demand for electric vehicles.

Additionally, OEMs are requesting if funds for the segment can be pulled in from other segments such as e-ambulances and e-trucks, which each have an allocation of ₹500 crore, which is unlikely to get utilized this fiscal.

With the upcoming period of no incentives, manufacturers may be forced to reevaluate their pricing strategies or offer alternative financing solutions to attract buyers.