India's Electric Vehicle Economy
FAME and PM E-DRIVE: Subsidising EVs
How India's FAME schemes and PM E-DRIVE have subsidised electric vehicles and charging, why subsidies were cut back, and the misuse scandal.
India has used subsidies to kick-start EV demand.
FAME schemes
- FAME I (2015): Faster Adoption and Manufacturing of Hybrid and Electric Vehicles.
- FAME II (2019): around 10,000 crore rupees, supporting two-wheelers, three-wheelers, buses and charging.
How subsidies worked
Buyers got a discount at purchase, reimbursed to manufacturers by the government, linked to battery size and local content rules.
Misuse
In 2023, the government found some makers had claimed subsidies while using imported parts in violation of rules, and ordered them to return funds.
Cuts
In June 2023, the subsidy for electric two-wheelers was cut sharply, and sales dipped briefly before recovering, suggesting the market was maturing.
PM E-DRIVE
In 2024, PM E-DRIVE replaced FAME with around 10,900 crore rupees for:
- Two- and three-wheelers, with subsidies tapering over time.
- E-buses, e-trucks and e-ambulances.
- Charging infrastructure.
Economic logic
Early subsidies can help new technologies reach scale, lowering costs. But they should taper as the market matures.
After the 2023 cut, an electric scooter's price rose by over 20,000 rupees. Sales fell for a few months, then recovered as buyers adjusted.
They are meant to help a market reach scale and then taper.
- FAME I (2015) and FAME II (2019) subsidised EVs.
- Some makers misused subsidies with imported parts.
- Two-wheeler subsidies were cut in 2023.
- PM E-DRIVE (2024) continues tapering support.
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