How government policies and incentives are boosting the EV two-wheeler market in India

India has become one of the main players in the EV sector due to the recent global shift towards sustainable and clean transportation, particularly in the two-wheeler industry. A large part of this growing popularity and awareness around electric vehicles, especially electric two-wheelers, can be credited to government policies and incentives.

Government policies such as FAME, Production Linked Incentive (PLI), and Electric Mobility Promotion Scheme 2024 (EMPS 2024) have a crucial role in generating awareness among people leading to a rise in the adoption rate of electric two-wheelers. For instance, the Vahan Portal shows that sales of EV two-wheelers rose by 26%, recording sales of 81,608 units in January 2024, a significant increase from the previous year, a part of which can be attributed to government policies that make EVs cost-efficient and affordable to everyone.

Importance of government policies in EV adoption rate

Strategies made by the government have made EVs accessible, affordable, and attractive to many customers. These initiatives are facilitating technological advancements and increasing domestic manufacturing without being dependent on imports. This is helping to reshape the entire electric two-wheeler ecosystem in India.

An IEA report says around 1.3 million electric two-wheelers were sold in India in 2023, accounting for 5% of total sales. Additionally, the nation’s sales grew by 40% in 2023 compared to 2022, and recent policies and innovations have played a part in it.

FAME Scheme: Under FAME 1 & 2 policy, benefits such as incentives and grants have been provided to promote the production and purchase of electric two-wheelers, making them more accessible. For instance, a subsidy of Rs 20,000 was given under the FAME 2 scheme for two-wheelers with a mileage of 80 km, reducing the cost of ownership.

State Government Schemes: State governments have also announced incentives to boost EV sales. Measures such as registration exemption and tax breaks play a key role in increasing the sales of EV two-wheelers. For instance, Karnataka announced that residents who scrap their old vehicles can avail of a tax concession of Rs 1,000-4,000 on their two-wheelers. The state was the first to propose an EV policy in 2017 and almost a quarter million EVs were registered making the state rank as the third highest in EV registration nationally.

PLI Scheme: The PLI scheme of the government reduces the dependency on imports and helps in boosting domestic manufacturing. Reports suggest that penetration of EV two-wheelers will increase by 10-15%, with sales reaching 3-4 million units by FY26 backed by pro-EV manufacturing policies like PLI scheme.

Technological Advancements: The EV industry is also witnessing various technological advancements in areas related to AI navigation, fire-resistant batteries, battery management systems, and charging capacity. Due to these advances, there is a surge in demand for EV two-wheelers, in 2023, approximately 4,42,901 units were sold compared to 2021, which only witnessed 48,179 sales.

Challenges faced by EV two-wheeler in Indian market

The trend of EVs is rising at a good pace in India, but EV manufacturers still face some challenges in the Indian market such as a longer funding window for the PLI scheme, which impacts the manufacturing process and innovation. Another challenge faced by manufacturers and consumers is awareness--most small producers and buyers don’t have access to government policies and incentives due to a lack of knowledge, which hinders the production and sales of EV two-wheelers.

These challenges could be solved by including various EV-supportive policies benefitting both manufacturers as well as the consumer. The much-awaited FAME 3 scheme aims at boosting EV adoption. This year’s interim budget also allocated Rs 7,327 crore for the solar power sector which will help boost the charging infrastructure of EVs and advance R&D of advanced battery technologies in the Indian market.

Despite facing all these challenges, the future outlook for EV two-wheelers in India looks bright, especially with the ongoing support of government policies. With the right support, India can efficiently transition to a sustainable environment and make green transportation more affordable.

Summary

The EV sector in India has seen significant growth in the past few years particularly in the two-wheeler industry due to the global shift towards sustainable transport and green environment. Government policies and incentives have played a major role in increasing the sale of EV two-wheelers, making them more attractive, affordable, and accessible to consumers. Policies such as FAME schemes, EMPS, and PLI help generate awareness further leading to a rise in the adoption of EVs. Government data shows that sales of EV two-wheelers rose by 26%, making sales of 81,608 units in January 2024, a significant increase from the previous year.

These policies not only benefit consumers but also boost domestic manufacturing without being dependent on imports. FAME schemes aim to increase the purchase of electric two-wheelers by providing a good amount of subsidy to the customers, whereas, the PLI scheme focuses on the imports of the product increasing domestic manufacturing and helping new startups. Different state schemes which provide benefits to consumers and manufacturers in the form of registration exemption, EV adoption through tax breaks, and many more to increase the sales of EV 2-wheelers. Additionally, technological advancements such as AI integration have surged the demand for EVs.

However, not all small or mid-manufacturers are aware of government schemes which results in delays in the production chain, impacting the sales of EV two-wheelers. Every manufacturer expects in the upcoming budget it should include various EV-supportive policies benefitting both manufacturers as well as the consumer.

(Prashant Vashishtha, Chairman & Managing Director, Sokudo Electric India)