September 19, 2024
📰 FEATURE STORY
Is the PM E-DRIVE scheme the right approach?
Buying an Electric Vehicle (EV) can be a tricky decision. The average consumer still has a lot of questions about EVs, such as mileage, charging, etc. Not to mention, some of the models currently available aren’t cheap. That said, the government is going all in on EVs to ensure it stays on track for its net zero goals.
The latest push in that direction is the PM E-DRIVE scheme to replace the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) scheme. With an outlay of ₹10,900 crore over two years, the government hopes this accelerates EV adoption. Will it work?
Context
In general, the demand for EVs is rising globally in response to lower battery prices, advancements in next-generation battery technology, and improvements in the economics of EVs. Electric car sales neared 14 million in 2023, representing a 35% year-on-year increase. 95% of these were from China, Europe, and the US. That puts the total number of EVs on the road at about 40 million.
While the EV market is steadily growing, it remains concentrated in a few markets. Sales are increasing in emerging markets like Brazil and India but relatively slowly. While it’s hard to gauge the exact numbers, only about 2% of car sales in India last year were EVs.
The future looks bright. EVs could account for over 40% of the domestic automotive market and generate over $100 billion in revenue by 2030. A few things need to happen for this to become a reality.
First, companies should have more options across segments and get the pricing right. EV penetration is quite high in the premium segment. It’s still not seen as a mass-market thing. Second, tier 2 and 3 cities will play an important role, and companies should plan ahead. Third, the B2B segment is ripe with opportunity. E-commerce and delivery companies want to become environmentally friendly. Finally, and perhaps most importantly, more charging infrastructure.
For the government’s part, they’ve not been passive. The FAME scheme, the Production Linked Incentive (PLI) scheme and the Go Electric campaign have contributed to increased demand in recent years. It’s fair to say India’s transition to EVs will depend heavily on government initiatives.
The abrupt withdrawal of FAME 2.0 earlier this year was a turning point. But now, there’s something new in store for the EV segment. The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme will succeed FAME 2.0 with a budget outlay of ₹10,900 crore over two years. It covers electric two-wheelers, three-wheelers, ambulances, trucks, and upcoming EVs. The government is hoping this will significantly accelerate EV adoption across the board.
VIEW: It’s the way to go
One of the interesting aspects of the PM E-DRIVE scheme is that it doesn’t just cover passenger vehicles. When we think of EVs, it’s usually four or two-wheelers, but it’s obviously more than that. The scheme covers vehicles like ambulances, trucks, and buses in the non-passenger vehicle segment. ₹500 crore for e-ambulances and ₹4,391 crore for e-buses is a step in the right direction.
The scheme is also a fix for the flaws of the previous FAME schemes, like improper subsidy claims for imported vehicles. It targets a 10% market share for two-wheelers and 15% for three-wheelers. For this to happen, charging infrastructure needs to be in place. The scheme also covers that, with 100% support for charging infrastructure at 88,500 sites. The investments will be over and above the PLI schemes for auto and auto component sectors.
What do the companies think? They’re quite happy. While FAME kickstarted India’s EV adoption journey, automobile companies feel the PM E-DRIVE scheme is the next logical step. For consumers, the introduction of EV vouchers is a boon. At the time of purchase, an Aadhaar-authenticated e-voucher will be given, which buyers can use to avail of demand incentives.
COUNTERVIEW: Some shortcomings
Perhaps the biggest drawback of the PM E-DRIVE scheme is that it doesn’t cover electric cars, unlike its predecessor, the FAME 2.0 scheme. Electric cars were also left out of the stopgap Electronic Mobility Promotion Scheme (EMPS), introduced in April and set to expire by the end of this month. The sector was no doubt hoping the final scheme would include benefits for four-wheelers.
The chorus for subsidies grew louder once the FAME 2.0 scheme was withdrawn. The result was a marked decline in sales. In fact, the incentives for all private vehicles are lower than the FAME 2.0 scheme. The 18% budget allocation under the PM E-DRIVE scheme for charging infrastructure against the 10% under FAME 2.0 can be seen as an indirect expenditure for e-cars, but it’s not enough.
It seems the government wants to gradually delink electric private vehicles from demand subsidies. This might work in favour of existing petrol and diesel car manufacturers and defeat the scheme’s purpose. Also, there’s nothing in the scheme for hybrid vehicles. That’s a missed opportunity, considering they’ve become a viable alternative since some consumers are still sceptical about EVs with things like ‘range anxiety’ and inadequate charging infrastructure.
Reference Links:
- Global EV adoption accelerates with India leading the charge: Forecasts predict 5.9 million sales by 2040 – Economic Times
- Policy and market synergy required for EV sector to thrive – Deccan Herald
- India Shifts Gears: ‘PM E-DRIVE Scheme’ Replaces FAME to Accelerate EV Adoption – India Briefing
- What Auto Inc has to say about PM E-Drive – Autocar
- EVs vs hybrids: Can the electric vehicle market survive without subsidies? – Policy Circle
- Electric cars excluded from PM E-DRIVE scheme: Could dent sales further – The Indian Express
What is your opinion on this?
(Only subscribers can participate in polls)
a) The PM E-DRIVE scheme is the right approach.
b) The PM E-DRIVE scheme is the wrong approach.
Previous poll’s results:
- India should have its own sovereign wealth fund: 56.7% 🏆
- India shouldn’t have its own sovereign wealth fund: 43.3%
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