Electric vehicle makers cheer PM's e-drive scheme

PM E-Drive

Electric Vehicle (EV) manufacturers have welcomed the government’s new 'PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive) Scheme'. The scheme is aimed at promoting electric mobility nationwide. This initiative comes as a much-needed response after the industry's call for continued support following the non-extension of the Faster Adoption and Manufacturing of Electric (FAME)-II scheme.

“The PM E-Drive scheme is a welcome move and a great step to accelerate EV adoption in India. The scheme will provide the required impetus to the EV industry to scale and mature rapidly, ensuring a swift transition from ICE [internal combustion engine} to EVs,”  Ola’s founder Bhavish Aggarwal posted on social media platform X.

On September 11, the Union Cabinet approved the PM E-Drive Scheme with an outlay of Rs 10,900 crore.

"We welcome the PM E-Drive scheme as a significant step in further accelerating India’s journey towards adoption of EVs. This scheme will incentivize customers to adopt environment-friendly electric two-wheelers, three-wheelers, trucks, buses and ambulances. The scheme also addresses the charging infrastructure by supporting 88,500 EV chargers across the country,” said Vinod Aggarwal, managing director (MD) and Chief Executive Officer (CEO), VE Commercial Vehicle (VECV).

The FAME subsidy, which was introduced by the then Department of Heavy Industry in 2015 and expired on March 31 this year, was superseded by the Electric Mobility Promotion Scheme (EMPS), 2024, which came into effect from April 1.

The new scheme is the replacement of the existing FAME -II subsidy.

The new PM E-Drive scheme significantly boosts EV manufacturers, particularly in the two-wheeler segment. Leading industry figures, such as Ather cofounder and CEO Tarun Mehta, have expressed concerns about slowing growth in the sector, largely attributed to the reduction of FAME subsidies.

The company recently filed draft red herring prospectus (DRHP), which stated that any suspension of the scheme will result in de-growth.

“Reduction, elimination or ineligibility for such government incentives, or any reduction, elimination, non-receipt or delays in receiving such incentives, could reduce the demand for electric two-wheelers (E2Ws) and potentially result in us becoming less price competitive, as compared to conventional ICE two-wheelers,” Ather said in its DRHP filed on September 10.

These schemes have a direct impact on the pricing of vehicles for customers.

For example, the cap on incentives for the FAME scheme was scaled back from Rs 15,000 per kWh to Rs10,000 per kWh, with effect from June 1, 2023.

As a result of the reduced subsidy, Ather’s customers faced an increase in the retail price of E2Ws ranging from Rs 20,434 to Rs 30,285.

“This contributed to a slight decrease in our revenue from operations from ₹17,809 million in Fiscal Year 2023 to ₹17,538 million in Fiscal Year 2024,” the DRHP said.

Some have pointed out the non-inclusion of battery swapping in the scheme.

“The government's focus on developing testing and standardisation is a welcome news to the industry. Two-year time frame helps industry plan things. Very sad to not hear anything for battery swapping and hope it gets covered under charging infra support,” said Vivekananda Hallekere, co-founder of Bounce.

What is PM e-drive?

The new scheme offers subsidies worth Rs 3,679 crore to incentivise adoption of battery-driven two and three-wheelers, ambulances, trucks and other emerging EVs.

Also Read: Cabinet approves PM E-Drive scheme with Rs 10,900 crore outlay

The major components of the scheme are as under subsidies or demand incentives worth Rs.3,679 crore have been provided to incentivize e-2Ws, e-3Ws, e-ambulances, e-trucks and other emerging EVs. The scheme will support 24.79 lakh e-2Ws, 3.16 lakh e-3Ws, and 14,028 e-buses.

The scheme also allocates Rs.500 crore for the deployment of e-ambulances. This is a new government initiative to promote the use of e-ambulance for a comfortable patient transport.

FAME-II scheme

Government approved Phase-II of FAME Scheme with an outlay of Rs. 10,000 Crore for a period of three years, which started from  April 1, 2019.

However, the central government reduced the budget allocation for the FAME scheme by nearly 44 per cent to Rs 2,671 crore for FY25, which may result in a slowdown in the adoption of EVs in India.

FAME-II was strategically designed to address environmental concerns, particularly in terms of pollution mitigation as it encourages the use of renewable energy sources for transportation needs, contributing to broader initiatives aimed at fostering cleaner and more eco-friendly mobility solutions in the country.

Since the reduction of FAME-II subsidy in June, registrations have went down drastically to nearly 45,000 units, as per Vahan website. However, it has bounced back to 88,473 units as of August.

Unlike FAME, the new PM E-Drive scheme also covers installation of charging stations.

“The scheme addresses range anxiety of EV buyers by promoting in a big way the installation of electric vehicle public charging stations (EVPCS),” the Press Information Bureau (PIB) said in a media release on September 11.

These EVPCS shall be installed in select cities with high EV penetration and also on certain highways. The scheme proposes the installation of 22,100 fast chargers for e-4 Ws, 1800 fast chargers for e-buses and 48,400 fast chargers for e-2W/3Ws. The outlay for EV PCS will be Rs.2,000 crore.