Govt Cuts Electric Two-Wheeler Subsidy by 50%, Extends PM E-DRIVE Scheme

The government has announced a significant revision to the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, extending its deadline to March 31, 2028, while reducing incentives for electric two-wheelers by 50%.

The subsidy for electric two-wheelers has been lowered to ₹2,500 per kWh from the earlier ₹5,000 per kWh. Additionally, the maximum incentive available per vehicle has been reduced to ₹5,000 from ₹10,000 in FY25.

These revised incentives will apply to electric two-wheelers with an ex-factory price of up to ₹1.5 lakh. The government plans to increase the budget for electric two-wheeler subsidies in FY27, despite the reduced incentives.

The total financial allocation for the PM E-DRIVE scheme remains unchanged at ₹11,900 crore. The scheme was introduced in September 2024 and was initially scheduled to continue until March 31, 2027.

The government has allocated around ₹2,767 crore for incentives linked to registered electric two-wheelers, which can provide support for a maximum of 45,79,120 registered electric two-wheelers.

The incentive amount will also be restricted to 15% of the ex-factory price of an electric two-wheeler or electric three-wheeler, whichever is lower. The government has retained the option to revise the per kWh incentive depending on future reductions in vehicle costs.

The PM E-DRIVE scheme aims to increase electric vehicle adoption, expand charging infrastructure, and strengthen the EV manufacturing ecosystem in India. The scheme has already led to the provision of 14,028 electric buses, with an outlay of ₹10,900 crore.

The Electric Mobility Promotion Scheme (EMPS) 2024 has been merged into the PM E-DRIVE framework, and the government has clarified that the scheme is limited by available funds, with total payouts restricted to the approved allocation of ₹11,900 crore.

If funds allocated for any component are exhausted before March 31, 2028, that segment will be discontinued, and no further claims will be accepted. The Ministry of Heavy Industries has specified that March 31, 2028, will be the final date for all categories covered under the scheme.

The electric three-wheeler L5 category has already reached its sales target and was closed on December 26, 2025. The final date for submitting claims under any component of the scheme has been set as December 31, 2027.

The extension of the PM E-DRIVE scheme and the reduction in incentives for electric two-wheelers are significant developments in India's efforts to promote electric vehicle adoption and reduce its dependence on fossil fuels. The government's commitment to increasing the budget for electric two-wheeler subsidies in FY27 suggests that it remains committed to supporting the growth of the EV industry in India.

The reduced incentives may impact the demand for electric two-wheelers in the short term, but the long-term benefits of promoting electric vehicle adoption are likely to outweigh the costs. As the government continues to support the growth of the EV industry, India is likely to see an increase in the adoption of electric vehicles, which will have a positive impact on the environment and the economy.

In conclusion, the extension of the PM E-DRIVE scheme and the reduction in incentives for electric two-wheelers are important developments in India's efforts to promote electric vehicle adoption. The government's commitment to supporting the growth of the EV industry is likely to have a positive impact on the environment and the economy, and will help to reduce India's dependence on fossil fuels.