In 2015, India set out on an ambitious journey to transform its transportation sector, aiming for electric vehicles (EVs) to constitute 30% of all vehicle sales by 2030. The vision was bolstered by the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme, state-level incentives, and commitments to localise manufacturing, positioning India as a potential global leader in green mobility. However, nearly a decade later, the journey appears to have hit significant roadblocks. Initial enthusiasm has given way to scepticism, as challenges such as insufficient charging infrastructure, supply chain disruptions for critical components like lithium-ion batteries, and inconsistent policy execution stall progress. Resistance from traditional industries and the absence of a cohesive, long-term strategy have further derailed the momentum, leaving India far from its envisioned EV revolution.
In 2024, India rolled out its new electric vehicle policy where it introduced a structured framework to bolster EV adoption while incentivising local manufacturing and substantial investments. A reduced customs duty rate of 15% is applied to Completely Knocked Down (CKD) units with a minimum CIF value of $35,000, available for a total period of five years. However, this is capped at 8,000 imported EVs annually, ensuring a balance between fostering international partnerships and encouraging domestic production. Manufacturers seeking duty concessions must commit to a minimum investment of Rs 4,150 crore, with no upper limit, thereby promoting significant capital inflow into the sector. Furthermore, they are required to establish operational facilities within three years and achieve a minimum domestic value addition (DVA) of 25% within this period, scaling up to 50% within five years.
The union government has also introduced the Electric Mobility Promotion Scheme (EMPS) 2024 to accelerate the adoption of electric two-wheelers (e2Ws) and three-wheelers (e3Ws), replacing the FAME-II scheme. With a Rs-5 billion budget allocation, the scheme was made effective from April to July 2024, focusing on increasing EV adoption while gradually reducing industry dependence on subsidies. Under EMPS 2024, the subsidy has been halved to Rs 5,000 per kilowatt-hour of battery capacity, capped at Rs 10,000 per e2W – 15% lower than the price subsidy provided under FAME-II. The scheme is expected to support the purchase of 3,33,387 e2Ws. However, it excludes electric four-wheelers (e4Ws) and electric buses, signaling a more targeted approach towards light electric vehicles. Globally, there is a strong correlation between government incentives and EVs’ market penetration.
In India, the EV sector has experienced a notable slowdown. Funding for EVs plummeted from $934 million in 2022 to $586 million in 2024, primarily due to policy changes and slower sales growth. This shift has led investors to focus on unit economics and profitability before committing capital. The sales growth rate for EVs has also decelerated. While 2024 saw 1.9 million EVs sold – a 24.5% increase from 1.5 million in 2023 – it represents a sharp decline compared to the 50% growth achieved between 2022 and 2023. Petrol vehicles continue to dominate India’s automotive market, accounting for 73.69% of the 26.04 million vehicles sold in 2024 (19.18 million units). Diesel vehicles made up 10.05% (2.62 million units), while the remaining 9.87% included alternative fuel vehicles such as petrol-CNG, hybrid, and compressed natural gas (CNG).
Barriers to investment, infra
The government’s recent EV policies appear to have backfired, garnering a lukewarm response from global manufacturers. So far, only one European carmaker has shown interest, and even that comes with conditions. Tesla, the primary target of the policy, has opted to stay away for now, citing global challenges and revisiting its India strategy. Similarly, Vietnamese automaker VinFast is reportedly reconsidering its investment plans, favouring a direct local manufacturing approach instead. German luxury carmaker BMW has also expressed disinterest, citing the policy’s failure to provide a level playing field.
Adding to these challenges, India requires investments of $20-30 billion to significantly accelerate the development of EV charging infrastructure, according to the India Energy Storage Alliance (IESA). However, the current policies seem insufficient to attract the necessary capital and partnerships, leaving critical infrastructure growth and broader EV adoption in jeopardy.
Despite the government’s efforts to promote hybrid vehicles and EVs, the sector continues to face critical challenges. As India’s EV market remains in its early stages, it struggles with inadequate charging infrastructure, inconsistent power supply, high battery import costs, dealer hesitation to promote EVs, limited vehicle durability, and low consumer trust. One major hurdle lies in the regulatory framework under the Motor Vehicles Act, 1988. The permits for EV operations – covering contract carriages, imports, goods carriers, and cabs – are inconsistently applied, with hybrids and mild hybrids often excluded from government incentives.
Electricity regulation complicates the situation. Governed by State Electricity Regulatory Commissions (SERCs) and DISCOMs, the existing power supply infrastructure is already strained, leaving little room for dedicated EV charging allocations. Additionally, India lacks a unified legislative framework for EVs and batteries.
India’s price-sensitive market demands a strategic focus on affordable EVs, especially lower-speed models, to accelerate adoption. Providing targeted incentives for these vehicles, along with extending benefits to personal four-wheelers, could broaden the EV market. However, key barriers such as high costs, limited model availability, and inadequate charging infrastructure must be addressed to ensure success.
While financial incentives offer an initial boost, sustainable growth in EV adoption will require robust regulatory measures. Implementing stricter emission norms, levying additional taxes
on ICE vehicles, and setting mandatory EV adoption targets could drive
the transition.
Electrification of fleet vehicles, such as those operated by Ola and Uber, is another critical area. Though currently hindered by high costs and limited charging infrastructure, fleet adoption is likely to pick up as battery prices decline and models improve. Tax reforms could also play a pivotal role. Reducing GST on EVs, replacement batteries, and hybrids, along with offering broader tax exemptions on EV purchases, would make these vehicles more accessible. Increasing subsidies per kWh of battery capacity and classifying EV financing under priority sector lending would further encourage consumer adoption. Lastly, maintaining consistent, industry-informed EV policies is crucial.
(The writers are fifth-year law students at National Law University, Jodhpur)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.