Industry must play a larger role than the government to ensure financial viability of the sector, and remain competitive, says PMO Advisor
The Ministry of Heavy Industry (MHI) has restored the subsidies for electric three-wheelers, allocated under the PM E-drive scheme, after the sanctioned amount of subsidies for FY25 exhausted within few months. However, several policymakers and government advisors believe that the industry now needs to play a much larger role, than the government, to ensure viability and remain competitive.
With the government having a steady focus on electric three-wheelers, the move is expected to encourage the transition from Internal Combustion Engines (ICE) vehicles to electric vehicles (EVs), at least for some more cities, noted experts.
The automotive industry needs to do more in terms of driving in new electric cars to enhance customer response, enabling higher adoption of such models, Advisor to Prime Minister at PMO Tarun Kapoor said on Tuesday, while speaking at an event on electric mobility, organized by FICCI.
There has been a recent announcement on the annual subsidy allocation for electric three-wheelers for FY25 being exhausted and, as a result, the government had temporarily stopped disbursing incentives for electric three-wheelers. The MHI has now sanctioned more funds for electric three-wheelers from the overall outlay of the PM E Drive scheme. There has been a slowdown in the sale of three-wheeler EVs, as evident from the latest data compiled by Society of Indian Automobile Manufacturers (SIAM). The data revealed that the e-rickshaws sales plunged by nearly 50 per cent in the month of October.
In the last four years, the industry has gone from zero per cent electric to 23 per cent electric today. Speaking about the electric three-wheeler market, Dr Anish Shah, FICCI President and CEO of Mahindra Group also confirmed that over the years subsidy came down from Rs 1lakh to Rs 50,000. He said: “As you get more volumes, you get greater scale and lower costs and therefore you need a lower subsidy.”
In recent times, there have been several suggestions about reducing the subsidy on the EVs. Even Union Minister Nitin Gadkari during an interaction stressed on the fact that there is no longer a need for subsidies in the EV market, as consumers are independently choosing to adopt EVs or compressed natural gas (CNG) vehicles.
With increased demand of EVs, the cost of the vehicles are coming down. Thus, the need for further financial incentives will become redundant for the manufacturers, experts added.
In keeping with this trend, Shah mentioned that the subsidy for three-wheeler EVs is currently pegged around Rs 25,000 and is likely to continue till end of FY26, based on the extensions the ministry has provided.
“After FY26, the subsidy will no longer be required because the industry will reach that level of scale where they will be able to fund themselves. And that will be one of the best examples anywhere in the world in terms of a transition of an industry from zero per cent to what will be 100 per cent, well before FY30,” Shah added.
The Central government is currently working to encourage its own departments to purchase EVs to shift usage towards electric mobility solutions, confirmed Kapoor. To encourage EV usage, there are provisions for interest-free loans for infrastructure building to states, which has been continued this year also.
HD Kumaraswamy, Minister for Heavy Industries and Steel, assured that the government will take all possible measures to boost EV manufacturing in the country. At the same time, there will be incentives and other measures to ensure that the customers don’t end up paying a heavy price for energy transition. “PM E-drive aims to support both (EV) manufacturers and consumers,” he added.
The Centre is imparting a key focus to charging infrastructure and aiming its implementation for use by electric trucks as well. The government has also pushed for ambulances to be converted into electric. Industry players have been advised to develop electric ambulances with government funds.
To encourage EV usages, there are provisions for interest-free loans for building EV infrastructure to states.