While India has made commendable progress in accelerating electric vehicle (EV) adoption through a series of fiscal and non-fiscal measures, achieving deeper and more sustained market penetration will require a broader policy approach, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report analyses a decade-long panel dataset (2014–2023), covering EV policy interventions across five vehicle segments at both state/UT and central levels. Using econometric methods, it evaluates the evolution of India’s EV policy framework, including the FAME-I (2015–19) and FAME-II (2019–present) schemes, the automotive and battery Production Linked Incentive (PLI) schemes, and various state-level subsidies.
One of the key findings is the substantial growth in India’s electric two-wheeler (E2W) market between 2019 and 2023, aligned with the implementation of FAME-II. However, this did not translate into a proportional rise in adoption rates, i.e., the share of E2Ws in total two-wheeler sales.
“The government should continue offering purchase subsidies to sustain momentum but clearly communicate a phased-down trajectory for a longer term. This will help consumers and manufacturers plan better, while nudging the market towards cost parity and self-sufficiency,” said Charith Konda, Energy Specialist at IEEFA and one of the report’s co-authors.
The report argues that while purchase subsidies are important, they are insufficient by themselves to change the market composition significantly. Investments in reliable public charging infrastructure and broader ecosystem development are necessary to achieve India’s target of 30% E2W sales penetration by 2030.
In the electric three-wheeler passenger (E3WP) segment, the study found significant growth during the FAME-I period, laying a robust foundation for ongoing market development. The segment showed higher responsiveness to early policy support compared to other EV categories.
“Strengthening financing, local manufacturing and urban integration can help the segment achieve greater scale and quality without reverting to broad-based subsidies,” said Subham Shrivastava, Climate Finance Analyst at IEEFA.
For the electric three-wheeler cargo (E3WC) category, the report notes a remarkable transformation between 2015 and 2023. Despite modest direct statistical correlation between FAME subsidies and sales or adoption in regression analysis, the segment grew from a negligible presence to nearly a third of the market by the end of 2023.
“Monitoring cost trends and sales or adoption rates will be critical to ensuring that scaling back does not stall the segment’s momentum,” Shrivastava added, recommending a predictable rather than abrupt phase-down of subsidies.
The electric four-wheeler commercial (E4WC) segment also showed notable growth under FAME-II, despite limited traction during FAME-I. While central schemes like FAME-II and the auto PLI drove early adoption, the report warns that the lack of direct subsidies for electric car purchases under the PM E-DRIVE initiative could hinder further momentum.
“Coordinated central and state action, pairing targeted purchase incentives, infrastructure rollout, and manufacturing scale-up can help electric cars compete effectively with their counterparts in India’s commercial vehicle market,” said Saurabh Trivedi, Sustainable Finance Specialist at IEEFA.
On electric buses (e-buses), the report highlights that neither FAME-I nor FAME-II significantly boosted market adoption. To address this, the authors propose extending subsidies to both public and private operators, launching an interest rate subvention scheme, and encouraging vehicle financing and leasing companies to offer leasing options to private bus operators.
“Robust highway charging infrastructure, parking facilities and the development of highway amenities could also go a long way in boosting adoption,” Trivedi added.
“As India transitions from FAME schemes to PM E-DRIVE and other similar initiatives, policymakers must recognise that each EV segment requires tailored intervention,” Konda emphasised. The report concludes that the success of India’s EV transition will depend not only on incentives but also on their strategic alignment with the unique growth trajectory of each vehicle segment, ensuring long-term sustainability and market self-reliance.
