Moneycontrol Pro Panorama | PM E-DRIVE scheme is FAME-II with a twist

The overall EV penetration levels are not anywhere close to the desired target.

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The PM’s new E-DRIVE scheme to boost sales of electric vehicles (EVs) has put an end to the uncertainty over the continued government support for electric vehicles. The end of the FAME-II scheme in FY2024 and the temporary six-month subsidy support under the Electric Mobility Promotion Scheme (EMPS) had raised questions on the rate of future adoption of EVs and India’s ability to reach its targets by 2030.

The E-DRIVE scheme with an outlay of Rs 109 billion (Rs 10,900 crore) valid for two years is merely FAME-II, with a slight twist.

Although the details of subsidy per vehicle are yet to be known, learnings from the past (EMPS) indicate that the government has steadily lowered the amount of subsidy per vehicle over FAME-II and EMPS, in order to ensure government support for more customers. This will ensure that EV penetration improves at a faster pace.

Note that the government's ambitious targets aim for electric vehicles comprising 30 percent of passenger vehicle (PV) sales, 70 percent of commercial vehicle (CV) sales, and 80 percent of two-and three-wheeler (2W and 3W) sales by 2030. While the overall EV penetration levels are not anywhere close to the desired target, e-2Ws, which showcase the best penetration levels are about 7 percent of the total domestic 2W market.

So, who gains from the new E-DRIVE scheme? Clearly, the government’s focus is to drive electric mobility in the mass market and ensure the customer gains directly.

Nearly a third of the outlay is earmarked for e-2Ws, e-3Ws, e-ambulances and e-trucks (new category introduced). According to electric mobility experts, the adoption rate in any product gains momentum after the first 5 percent, which is considered the inflection point and two-wheelers have crossed that.

The government has also allocated Rs 3,435 crore for the procurement and operation of 38,000 e-buses by public transport authorities (PTAs). In fact, the E-DRIVE has detailed the manner in which the scheme can help alleviate the high upfront cost of e-buses.

Industry experts say these vehicular segments impact the mass market and more individuals on the road to electric mobility. This is perhaps why e-PVs are kept out of scope of this scheme. Furthermore, e-PVs are largely in the premium and luxury vehicles segment, where a small subsidy will not really influence a customer’s decision to purchase.

The scheme, contrary to expectations, eliminated hybrid cars and compressed natural gas (CNG) vehicles that are not in sync with the government’s commitment to electric mobility.

A key positive is the E-DRIVE scheme, albeit slightly lower in outlay compared to FAME-II (Rs12,000 crore), has revamped implementation to prevent misappropriation of funds that had cast a shadow over FAME II. E-DRIVE payments will be linked to the customer’s Aadhaar identity. A significant amount of the total outlay is also earmarked for increasing charging infrastructure for EVs.

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