Government Extends Incentives for Electric Cargo Three-Wheelers

Key Highlights:

• The government extended incentives for electric cargo three-wheelers at a reduced rate for the current year.
• The subsidy for 80,546 units in 2024-25 was used up by November.
• From April 2025, incentives will be Rs 2,500 per kWh, with a cap of Rs 25,000 per vehicle.
• Subsidies for 2025-26 were reduced compared to earlier plans.
• Electric three-wheelers make up 54% of sales this year, with M&M and Bajaj Auto leading.

The government has decided to extend the demand incentive for cargo electric three-wheelers under the PM E-Drive scheme at a reduced rate for the current financial year. This extension follows the depletion of the allocated subsidy for the financial year 2025 earlier this month.

Extension of Subsidy for Cargo Electric Three-Wheelers

The PM E-Drive scheme aimed to incentivize 80,546 cargo electric three-wheelers for the year 2024-25. The target was met in the first week of November. As a result, the government has extended the subsidy to cover more units. However, the incentives for cargo electric three-wheelers will now be at a reduced rate.

New Subsidy Rate and Cap

The subsidy for electric cargo three-wheelers, which was originally applicable for 1.25 lakh units starting April 2025, will now be available sooner. The new incentive is set at Rs 2,500 per kWh, with a cap of Rs 25,000 per vehicle. This change applies to the current financial year.

PM E-Drive Scheme: Target and Changes

Under the PM E-Drive scheme, the government initially set a target of incentivizing 80,546 electric cargo three-wheelers at a rate of Rs 5,000 per kWh with a cap of Rs 50,000 per vehicle. For FY26, the target will increase to 1.25 lakh units, with the reduced incentive of Rs 2,500 per kWh and a cap of Rs 25,000 per vehicle.

Future of Electric Two-Wheelers and Three-Wheelers

It has been reported that the government may not extend demand incentives for electric two-wheelers and three-wheelers beyond the financial year 2026. This could mark a shift in the industry’s reliance on government support. 

At present, electric two-wheelers, three-wheelers, buses, trucks, and ambulances qualify for demand incentives under the PM E-Drive scheme. Electric rickshaws receive a subsidy of Rs 5,000 per kWh, capped at Rs 25,000 per vehicle, while passenger and cargo electric autos enjoy a subsidy of Rs 5,000 per kWh, with a cap of Rs 50,000 per vehicle. However, starting in April 2025, these subsidies will be reduced by half.

Electric Three-Wheeler Market Growth

The electric three-wheeler market in India has shown significant progress. Approximately 54% of the three-wheelers sold in the first half of the financial year were electric. Major players like Mahindra & Mahindra (M&M) and Bajaj Auto are leading the charge in this segment.

Industry Moving Toward Self-Sufficiency

Anish Shah, president of the Federation of Indian Chambers of Commerce and Industry (FICCI) and CEO of Mahindra Group, expressed confidence that the electric three-wheeler industry will become self-sufficient by the year 2026. 

He believes that the industry will not rely on government subsidies once it reaches a sustainable scale. Senior government officials believe that only segments with less than 10% electric vehicle penetration will need demand incentives from 2026 onwards.

This year, the government met its target of incentivizing 80,546 electric three-wheelers under the PM E-Drive scheme, with 79,974 units sold by OEMs as of November 7. Any sales beyond the target will not qualify for incentives in FY 24-25. Minister Nitin Gadkari also mentioned that electric vehicles may not need subsidies in the future as their numbers increase and costs decrease.

Currently, electric vehicle adoption in India is around 7%, with two-wheelers making up 56% of sales and three-wheelers 38%. Affordability and charging infrastructure remain key challenges for faster adoption.

Also Read: FADA Sales Report October 2024: Three-wheeler (3W) sales increased by 11% YoY

CMV360 Says

The extension of incentives for electric cargo three-wheelers is a good move, helping the EV sector grow. While the lower subsidy might make it less appealing for some buyers, it’s a step towards a more sustainable future without depending too much on government support. With more electric three-wheelers on the road and companies like M&M and Bajaj Auto leading, the market is on the right track.