India approves $1.3 billion incentive scheme for electric vehicles

MUMBAI (ICIS)–India has approved a two-year scheme with an outlay of rupees (Rs) 109 billion ($1.3 billion) to provide incentives for increased adoption of electric vehicles (EVs) as the south Asian nation works to reduce transportation’s environmental impact and improve its air quality.

• Two-wheelers account for 56% of 3 million registered EVs in India
• EV sales jump 45% in fiscal year ending March 2024
• Annual sales could hit 10 million units by 2030

The new scheme called PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) was given the “go” signal at the Union Cabinet meeting chaired by Prime Minister Narendra Modi on 11 September.

“Subsidies worth Rs36 billion have been provided to incentivize e [electric]-two-wheelers, e-three-wheelers, e-ambulances, e-trucks and other emerging EVs,” India’s Union Cabinet said in a statement.

The scheme is expected to support about 2.48 million electric two-wheelers; 316,000 e-three wheelers; and 14,028 e-buses.

Electric cars and hybrid vehicles have been excluded from the scheme. Penetration of four- wheeler EVs in the Indian market is very low, with over 95% of the sales coming from two- to three-wheelers.

In the fiscal year ending March 2024, passenger vehicles accounted for about 18% of total domestic vehicle sales, according to the Society of Indian Automobile Manufacturers (SIAM).

EVs provide growth opportunity for the chemical industry, with chemical producers separately developing specialty polymers and adhesives for the environment-friendly vehicles.

Under the PM E-DRIVE scheme, the government has allocated Rs43.91 billion for the procurement of e-buses by state-owned agencies. These buses will be deployed in nine cities across the country.

To curb air pollution, the government has set aside Rs5 billion for replacement of traditional trucks with e-trucks. Additional incentives will be given for scrapping old trucks.

As a new initiative, the government will also provide Rs5 billion for the adoption of e-ambulances.

The scheme will promote installation of public charging stations in cities with high EV penetration and on selected highways.

A Rs20 billion budget was allocated to install 22,100 chargers for electric four-wheelers; 1,800 for electric buses; and 48,400 chargers for two and three-wheelers.

Meanwhile, Rs7.8 billion was earmarked to help modernise government operated testing agencies to deal with new and emerging green mobility technologies,

The new scheme replaces two earlier initiatives called Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) scheme and the Electric Mobility Promotion scheme.

While EV penetration in the country is currently less than 7%, demand for environment-friendly vehicleas has been rising over the past few years, according to the Federation of Automobile Dealers Associations (FADA).

Affordability and limited charging infrastructure are major hurdles in the faster adoption of electric vehicles.

The primary objective of the new scheme is to “expedite the adoption of EVs by providing upfront incentives for their purchase, as well as by facilitating the establishment of essential charging infrastructure for EVs”, the Union Cabinet stated.

The government expects to see annual EV sales of 10 million units by 2030, said Nitin Gadkari, India’s minister of road, transport and highways said on 10 September.

Focus article by Priya Jestin

($1 = Rs83.97)