As the world accelerates toward electric mobility, one thing is clear: subsidy strategies are not just policy tools — they are competitive instruments in the race for industrial dominance and climate action. Nations like India, China, the United States, and European countries are deploying different models of subsidy to push electric vehicle (EV) adoption, local manufacturing, and energy independence. This comparative article examines how these economies have established and implemented their subsidy systems, and what can be learned about how they each have evolved over time.
India: Targeted subsidies to democratise EV uptake
India has a layered, strategic approach to EV subsidies that where the strategy focuses on infrastructure, cost, and domestic manufacturing.
National Level Subsidies
- Faster Adoption and Manufacturing of Electric Vehicles (FAME II), is a ₹10,000 crore scheme launched in 2019 offering direct subsidies of ₹15,000 to two-wheelers, ₹20,000 for three-wheelers and up to ₹50 lakh for electric buses.
- FAME II programs had benefitted more than 11 lakh vehicles by the end of April 2024.
- In October 2024, PM e-Bus Sewa and PM e-Drive were launched in India, with ₹10,900 crore available until March 2026 to support two-, three-, and four-wheelers as well as public transport fleets.
Tax-Based Financial Assistance
The GST rate on EVs has been reduced from 12% to 5%, which effectively amounts to indirect subsidization.
Under Section 80EEB of the Income Tax Act you can take a deduction of up to ₹1.5 lakh for the interest rate on your EV loan.
State-Level Subsidies
- Delhi: ₹10,000 per kWh (capped at ₹1.5 lakh for four-wheelers).
- Maharashtra: ₹5,000 per kWh plus scrappage incentives.
Other states like Gujarat, Tamil Nadu, Meghalaya, and Assam also offer additional subsidy benefits.
Infrastructure Subsidy
Through the Bureau of Energy Efficiency (BEE), India is deploying over 88,000 charging stations using subsidy funds under RDSS and PM e-Drive.
India’s subsidy program hopes to create a balanced EV ecosystem incorporating infrastructure and supply-chain development and customer incentives.
China: From Mass Subsidy to Market Stabilization
China was the forerunner in EV adoption by offering large subsidies over the past ten years; however, it is moving to a market-driven approach.
Historic Direct Subsidies
- Between 2009 and 2022, China spent approximately ¥200 billion (US$28 billion) in direct EV subsidy.
- EVs received up to ¥60,000 (US$8,000) per vehicle, covering up to 60% of purchase cost during peak years.
Current Subsidy Mechanisms
- Direct subsidy ended in December 2022.
- However, purchase tax exemptions remain until 2027, valued at up to ¥30,000 (US$4,300) per vehicle through 2025 and ¥15,000 (US$2,150) from 2026–2027.
Local Government Support
Major cities provide non-monetary subsidy: free or prioritized license plates, toll waivers, and exemptions from driving restrictions.
Additionally, some regions provide funding for home charger installations and fleet electrification.
China has changed a more structural rather than subsiding approach; it is focused on supply-side innovation and major capital building (NEA has a plan for 3 million charging points by 2025).
US: Supply Chain and Consumer Subsidies Based on IRA
The Inflation Reduction Act (IRA) is the foundation of the U.S. subsidy model, including sourcing regulations and supply and demand incentives.
Credits for clean vehicles
1.New EVs: Up to $7,500 split into:
- $3,750 for acquiring critical minerals (from FTA or US countries).
- US$3,750 for battery component manufacturing in North America.
2. Used EVs: US$4,000 credit under Section 25E.
3.Commercial EVs: US$7,500–US$40,000 via Section 45W.
4. EV Chargers: 30% tax credit up to US$1,000 for residential and up to US$100,000 for commercial projects.
Supply Chain Subsidy
IRA provides subsidy via tax credits for battery production, EV assembly, and critical mineral extraction in the U.S.
Billions allocated for workforce training, disadvantaged community support, and industrial revitalization.
Risks
As of 2025, some legislators have introduced bills to repeal parts of IRA, including the clean vehicle subsidy — a significant risk to long-term planning.
The U.S. subsidy framework links green technology to domestic job creation and industrial policy, with a focus on energy security.
Europe: A Patchwork of National Subsidies & EU-Wide Regulations
Europe’s EV subsidy strategy blends direct incentives with emissions mandates and public charging standards.
Member State Incentives
Germany (Umweltbonus): Up to €6,000 subsidy for EVs; declining gradually.
France: Up to €7,000 for low-income households; new “social leasing” plan introduced in 2024.
UK: Plug-in grants for electric vans and fleet vehicles.
EU-Level Support
Innovation Fund and Recovery and Resilience Facility provide subsidy for battery plants and R&D.
European Investment Bank backs green auto infrastructure and manufacturing.
Regulatory Support (Indirect Subsidy)
- CO₂ fleet average targets (zero-emission mandate by 2035).
- Alternative Fuels Infrastructure Regulation (AFIR): mandates chargers every 60 km on highways.
- Euro 7 emission norms further incentivize EV shift.
While Europe’s direct subsidy is declining, regulatory and infrastructure support remains robust.
Global Subsidy Comparison: A Quick Glance
| Region | Direct Purchase Subsidy | Tax Incentives & Credits | Infrastructure Subsidy | Supply Chain Subsidy | Stability Outlook |
| India | High per-kWh (FAME II, E-Drive) | Loan tax breaks, 5% GST | ₹2,000 cr charger rollout | PLI scheme for batteries & motors | Stable till 2026 |
| China | Phased out (2022) | Tax exemption till 2027 | Massive public & private rollout | Local grants, R&D funds | Phasing to market-led |
| USA | Up to US$7,500 | Used EV, charger, commercial | Up to US$100,000 for chargers | Billions via IRA | Under political scrutiny |
| Europe | Up to €7,000 (varies) | VAT cuts in some regions | EU funding + member plans | EIB loans, battery alliances | Reducing direct subsidies |
Overall, subsidy intensity follows this pattern by 2025:
China: Highest cumulative and infrastructure support.
India: Targeted central + state subsidy, evolving to cover infrastructure and loans.
Europe: Moderate direct subsidy, strong regulatory frameworks.
US: Tax credit tied to supply chain; future uncertain.
Key Takeaways
- Subsidy volume matters, but design matters more. China’s early direct subsidy helped EV saturation; India’s per kWh subsidy targets cost parity and scale.
- The US frames subsidy to incentivize domestic supply chains via IRA, linking consumer benefit to strategic sourcing.
- Europe’s subsidy packages balance grants with emissions regulations; less cash, but strong structural support.
- India’s unique approach combines purchase subsidy, tax cuts, and infrastructure grants aimed at broad inclusion (2‑, 3‑, 4‑wheel segments).
- Political volatility (US) and tapering (China) illustrate that long-term planning is critical—India’s schemes through 2026 offer relative stability.
Risks & Recommendations
- Subsidy fatigue: China’s phase‑out shows dropping subsidy risk; India must manage fiscal sustainability.
- Targeting & equity: Ensure subsidy reaches middle/lower-income buyers (used EV credits, finance schemes).
- Complementarity: Domestic subsidy needs matching infrastructure investment—India’s BEE grants are key, but rural coverage lags.
- Stakeholder coordination: India could stabilize state and federal subsidy alignment; US lessons show how politicization can unravel incentives.
- Transition paths: As technologies mature, subsidy must shift from hardware to services (battery recycling, grid integration).
Conclusion
The global subsidy race reflects different national imperatives:
- China used massive subsidy to jumpstart EVs, now pivoting to tax and regulation.
- The US links subsidy directly to industrial policy via IRA but remains politically precarious.
- Europe blends moderate grants with strong regulation.
- India’s dynamic subsidy mix—purchase, tax, infrastructure, regional—could significantly scale EVs if maintained and aligned.
In this global contest, subsidy policy is no longer just financial—it’s about shaping supply chains, equity, and strategic autonomy. While each nation’s path varies, all are leveraging subsidy as a key tool for the green industrial transition. The next few years will determine which models are financially sustainable and scalable.