Electric cars excluded from PM E-DRIVE scheme

The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme excludes electric cars from direct subsidies, relying instead on lower GST and other measures to support the electric vehicle (EV) sector.

Overview of the PM E-DRIVE Scheme

1. Financial Outlay: ₹10,900 crore over two years, replacing the previous FAME II scheme.
2. Scope:
   1. Provides fiscal incentives for:
      1. 25 lakh electric two-wheelers
      2. 3 lakh electric three-wheelers
      3. 14,000 electric buses
   2. Electric cars are not eligible for any subsidies.
3. Additional Provisions:
   1. Establishment of public charging stations.
   2. Modernization of testing agencies for green mobility technologies.

Background: The FAME Scheme

1. FAME Policy: Launched in 2015 to reduce vehicular emissions and promote sustainable transport under the National Electric Mobility Mission Plan.
2. Key Phases:
   1. FAME I (2015-2019): Focused on incentives for electric and hybrid vehicles, along with charging infrastructure.
   2. FAME II (2019-2024): Expanded funding to USD 1.19 billion, emphasizing public transport and emission reduction.

Key Facts About the Promotion of Electric Cars

1. Impact of Exclusion:
   • Sales of electric cars declined by 9% from April to August 2024 compared to the months before FAME II ended.
2. Charging Infrastructure:
   • Approximately 25,000 public charging stations for 46 lakh registered EVs, leading to a high ratio of 184 EVs per charging station.

Supporting Measures

1. Production Linked Incentive (PLI) Schemes: Aim to support the EV sector through incentives for auto components and advanced battery technology, which could lower production costs.
2. Lower GST: Electric cars benefit from a 5% GST, significantly lower than rates for hybrid and internal combustion engine vehicles (28% and 49%, respectively).

Current Context and Industry Response

1. The PM E-DRIVE scheme emphasizes support for two- and three-wheelers and buses, explicitly omitting electric cars. This aligns with government views that current measures (lower GST, localization schemes, and charging station funding) are sufficient.
2. The Minister of Road Transport and Highways indicated that subsidies are no longer necessary due to declining battery costs and economies of scale.

Sales Trends Post-FAME II

1. Following the end of FAME II, electric car sales declined significantly, averaging 7,456 registrations per month from April to August 2024, with a low of 6,300 in August, reflecting a 10% decline compared to the previous year.
2. The absence of fiscal incentives indicates that the electric car market still requires support to become self-sustaining.

Challenges

1. Inadequate Charging Infrastructure: The current charging station ratio is significantly higher than in other countries promoting e-mobility, complicating consumer adoption.
2. Many public charging stations are not equipped for electric cars or do not provide fast charging.

Conclusion

The exclusion of electric cars from the PM E-DRIVE scheme raises concerns about future sales and market sustainability. Enhanced infrastructure and supportive measures are crucial for promoting electric mobility and achieving the government’s goal of 30% electric vehicle penetration by 2030.

 

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