Govt advances FY26 subsidy funds for e-three wheelers

The Union government has decided to advance the PM E-Drive subsidy funds for over 120,000 electric three-wheelers, which were set to be used from April to the end of FY25.

PM E-Drive is the government's flagship subsidy scheme which provides demand incentives by subsidizing the price of electric vehicles for customers. 

The decision comes as the allocated subsidy for the ongoing fiscal year has been exhausted far earlier than anticipated, sparking concern among manufacturers about sales disruptions, two sources with direct knowledge of the development told Mint on condition of anonymity.

The Ministry of Heavy Industries (MHI) has decided on the advancement following representations from the Society of Indian Automobile Manufacturers (Siam) last week. Despite halving the subsidy per vehicle to ₹25,000—down from ₹50,000 just days ago—the government has chosen to continue the incentive programme instead of halting it entirely.

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The additional funds that are used for subsidizing e-three-wheelers this fiscal, will be deducted from the budget for the next year. 

Industry executives Mint spoke to said the funds for FY26 are expected to be used by the first quarter of the fiscal, too, and for the moment there is no clarity on whether additional funds will be made available after this.

“However, what we don't like is abruptness of decision making which impacts our supply chain and business partners. If we know funds are going to run out by a certain time, we can plan a smoother transition,” a senior three-wheeler industry executive told Mint on condition of anonymity.

The Ministry of Heavy Industries is expected to issue a formal notification announcing the advancement of subsidy in a day or two.

A response to growing demand

The PM E-Drive scheme, launched in October 2024, and the FAME-II scheme preceding it which ran for five years, have been instrumental in driving the adoption of electric three-wheelers in India, particularly for last-mile connectivity and small-scale logistics. However, the scheme’s annual cap for FY25—set at 80,546 units—was nearly reached by early November, leaving many manufacturers and dealers in limbo.

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Electric three-wheelers have gained traction as an affordable and environmentally friendly option, but industry executives argue that their competitiveness hinges on government subsidies. Since the subsidies are now halved, manufacturers anticipate they will still have to take price hikes to pass on the additional cost to customers.

The government’s earlier stance of discontinuing subsidies until FY26 had raised alarm bells among stakeholders. Siam and OEMs requested a smoother transition, with appeals to reallocate unused funds from other underutilized segments, such as e-ambulances and e-trucks.

From April 2025, the PM E-Drive subsidy was to be reduced to ₹25,000 per vehicle, but now with the government choosing to move the scheme forward by four months, the quantum of the subsidy has gone down before time.

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Despite these challenges, the e-three-wheeler segment has had a strong run so far, buoyed by rising fuel costs and growing environmental awareness. With over 150,000 units already benefitting from the scheme, the government’s decision to advance the subsidy funds underscores the segment’s importance in India’s transition to electric mobility.