India is advancing rapidly in electric mobility mainly due to strong government backing to EV incentives. Through central schemes like FAME-II and state incentives, these developments have played an important role to increase adoption levels, change the total cost of ownership and promote local manufacturing. As the EV market continues to grow and more subsidies are removed, an important question arises; who has actually benefited from India’s EV subsidies – OEMs, start-ups or consumers?
This article will examine the real impact of EV subsidies on various stakeholders, identify unintended consequences and ascertain whether these financial contributions do indeed result in a self-sustained electric mobility ecosystem or just annual income streams for a chosen few.
Understanding the Green Subsidy Landscape
India is building the framework of its EV subsidy structure on two key pillars: demand incentives and manufacturing-linked incentives. The FAME-II scheme (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) has been the anchor of this effort since 2019, committing almost ₹10,000 crore, with a focus on incentivising the electrification of two-wheelers (E2Ws), three-wheelers (E3Ws), and buses, in particular.
At the same time, the Production Linked Incentive (PLI) schemes for Advanced Chemistry Cells (ACC) and EV components are meant to develop manufacturing facilities in India. A number of states, for example, Maharashtra, Tamil Nadu, Delhi and Gujarat have their own Evs subsidies as well in order to create a comprehensive and multi-layered subsidy for EV buyers and manufacturers.
But the effectiveness of these EV subsidies varies depending on who is utilizing them—and how.
OEMs: Building Scale, Facing Scrutiny
Established automotive manufacturers have arguably been among the biggest beneficiaries of EV subsidies, especially those who moved early into electric mobility. Original Equipment Manufacturers (OEMs) like Tata Motors, Hero Electric, TVS Motor, and Mahindra Electric benefitted from national and state incentives which allow manufacturers to sell EVs at reduced sums and offset costs of EV purchases.
In addition, EV incentives helped manufacturers close the gap in the increased costs of batteries and support localization efforts while increasing supply. For instance, Tata’s Nexon EV became one of the best-selling electric vehicles in the country primarily because of the competitive pricing made possible by EV subsidies.
Still, they have had their share of hurdles. A number of large companies had audits done on FAME-II compliance, mainly about localizing standards. In some cases, compensation was deferred, and grants were momentarily paused. Even with these complications, most of the large OEMs have been able to survive the regulatory uproar largely because they are well capitalized and have established foundational infrastructure.
Though EV subsidies gave OEMs a head start, whether they can continue without financial incentives with the growth is another discussion.
Startups: Innovation Meets Operational Hurdles
Startups focused on electric vehicles have defined India’s electric transformation—dynamic, tech-first and entrepreneurial. Companies like Ather Energy, Ola Electric, River and Yulu have taken advantage of the EV subsidies to achieve the goal of making their price offering attractive and scale rapidly.
EV subsidies from state and centre provided a confident base for startups to quickly experiment with business models and gain brand interest. The significant interest in scooters by Ola Electric was partly a function of pricing, adjusted for subsidy prices, that made batteries more affordable and competitive.
In contrast, startups faced a unique set of challenges. Several faced allegations of policy violations (including failure to achieve the domestic value addition thresholds beyond which EV subsidies would be revoked or frozen). Unlike large OEM’s, startups do not have the working capital buffers baked into their business that allow for changes in cash flow and are therefore much more vulnerable.
Also, the delays in the disbursement of EV subsidies and compliance requirements were both obstacles to successful cash flow management. Some startups have managed to survive and grow but others face uncertainty in their growth plans because of the uncertainty of their subsidies.
Even with these obstacles, EV subsidies were critical to allowing startups to position themselves in a capital-intensive, competitive market.
Consumers: Enjoying Benefits, But For How Long?
From a consumer perspective, EV subsidies have been highly effective in bringing down the upfront cost of EVs—especially electric two-wheelers and three-wheelers. In cities like Delhi, Pune, and Bengaluru, buyers saw cost reductions of up to ₹30,000–50,000 due to EV subsidies, making EVs competitive with petrol counterparts.
As a result, EV penetration in the two-wheeler market surged in 2023 and early 2024. Shared mobility providers, delivery fleets, and urban commuters were among the biggest consumer beneficiaries of these EV subsidies.
However, with the FAME-II scheme ending in March 2024 and the replacement EMPS scheme offering reduced subsidies, consumers are beginning to feel the pinch. Many states have also exhausted their subsidy budgets, leading to uncertainty in pricing and adoption trends.
Additionally, EV subsidies have mostly benefitted urban consumers with access to information, infrastructure, and state-level incentives. Rural buyers, on the other hand, continue to face challenges around charging infrastructure, financing, and availability—limiting the nationwide impact of EV subsidies.
Unintended Consequences of the Subsidy Push
While EV subsidies accelerated adoption, they also created several market distortions:
- Quality issues: Some manufacturers rushed products to market to claim subsidies, compromising on quality.
- Dependency: A few players over-relied on EV subsidies rather than building cost-competitive products.
- Audit risks: Multiple OEMs and startups faced regulatory scrutiny over alleged misuse, leading to reputational risks and delayed payments.
The EV industry, in many ways, became subsidy-driven rather than innovation-driven. As subsidies reduce or disappear, companies without strong fundamentals may struggle to remain competitive.
Who Are the Real Winners?
Who Are the Real Winners?
To summarize the impact of EV subsidies, let’s evaluate each stakeholder group:
|
Stakeholder |
Key Benefits | Main Challenges |
Net Outcome |
|
OEMs |
Scale, cost reduction, branding | Regulatory audits, over-reliance |
Mixed to Positive |
|
Startups |
Market entry, brand growth | Compliance burden, cash flow issues | Mixed |
| Consumers | Lower upfront cost, early adoption | Uncertainty post-subsidy |
Short-term winners |
EV subsidies created a platform for rapid growth, but sustainability will depend on innovation, localization, and infrastructure development.
What’s Next: A More Targeted Approach
As India matures in its EV journey, the future of EV subsidies lies in smarter design:
- Incentivizing battery recycling and energy-efficient tech
- Prioritizing commercial and rural adoption
- Offering performance-linked incentives instead of blanket pricing support
- Streamlining subsidy disbursement processes
India must shift from a subsidy-dependent ecosystem to one that is innovation-led, ensuring that all stakeholders—OEMs, startups, and consumers gain from long-term electrification.
Conclusion
India’s EV subsidies have played a pivotal role in igniting the electric mobility movement. They helped OEMs scale, allowed startups to disrupt, and made EVs affordable for consumers. But as policies evolve and support reduces, the focus must shift to building robust business models, reliable infrastructure, and sustainable innovation pipelines.
The future of India’s EV market can’t ride solely on EV subsidies—it needs collaboration, localization, and policy clarity to drive the next phase of green mobility.