The second iteration of India’s EV subsidy, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II), is set to come to an end on the 31st of March 2024, after five years in operation. However, a new announcement by the Ministry of Heavy Industries and Ministry of Finance, has allocated INR500 Crore (USD60.3 million) to extend subsidies from April to July 2024, under the new Electric Mobility Promotion Scheme 2024 (EMPS). EV subsidies in India differ to other parts of the world as they have a primary focus on two and three-wheeler markets.

How are the subsidies in India changing?

The current FAME II scheme offers an incentive to manufacturers of INR22,500 (USD271) for two-wheeler vehicles, however under the new EMPS, manufacturers will receive INR10,000 (USD120) per vehicle. Similarly, for rickshaws and three-wheeler vehicles, the incentives have been capped at INR25,000 (USD301) and INR50,000 (USD603) per vehicle respectively under EMPS.

How have EV subsidies in India changed in the past?

This announcement follows the subsidies initially being reduced in July 2023, with many expecting the reduction to negatively affect two and three-wheeler EV sales. Although two-wheeler EV sales did dip slightly, overall, in 2023 sales finished strong, 36% above those in 2022, showing robust market sentiment despite reduced incentives.

Rho’s Evaluation, how will the subsidy change affect sales?

Incentives are key to driving sales, especially for encouraging the population to transition to EVs as initial upfront costs are often major barriers to transitioning. However, it is unclear how the changing subsidy landscape will affect sales as the subsidies goes directly to manufacturers. Some manufacturers may choose to absorb the reduction in subsidy and not pass it on to consumers, whereas others may not be able to do so. This may result in increased price differentials and reduced adoption rates.  A multitude of regional subsidies are also available which will support the continued growth of the Indian EV transition.

Following on from July, it is unclear what the subsidy landscape will look like in India. There are rumours further funding will be announced but with an upcoming election, nothing is confirmed.

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