Government to Stop PM E-Drive Incentives After L5 Electric 3-Wheeler Target of 2.88 Lakh Units Is Met or by December 26, Says Letter to SIAM Dated December 23
India’s push towards electric mobility has received a major boost, as the ₹857-crore subsidy allocated for larger electric three-wheelers (L5 category) under the ₹10,900-crore PM E-Drive scheme is set to be exhausted nearly three months ahead of schedule. The funds, originally expected to last until March 2026, are likely to be fully disbursed by December 2025, reflecting the rapid adoption of electric three-wheelers across the country.
According to a government letter issued by the Ministry of Heavy Industries to the Society of Indian Automobile Manufacturers (SIAM) on December 23, incentives under the scheme will stop once the target of 288,809 L5 electric three-wheelers is achieved or by December 26, whichever is earlier. The ministry clarified that the scheme is strictly fund-limited, leaving no scope for extending incentives once the allocated amount is exhausted.
“Para 46 of the scheme notification clearly stipulates that the PM E-Drive Scheme is fund-limited, and once the allocated funds for the scheme or any of its sub-components is exhausted, no further claims will be entertained,” the ministry stated in the letter.
Strong Demand for L5 Electric Three-Wheelers
Under the PM E-Drive scheme, subsidies are available for two categories of electric three-wheelers. These include L3 e-rickshaws, typically used for last-mile urban transport, and L5 electric three-wheelers, which are larger vehicles designed to carry both passengers and cargo. While L3 vehicles usually feature battery capacities between 2–7 kWh, L5 vehicles are equipped with larger 7–12 kWh batteries, offering better range and higher payload capacity.
The government initially allocated ₹192 crore for L3 e-rickshaws and ₹715 crore for L5 vehicles. However, due to low uptake in the L3 segment, the allocation for L5 electric three-wheelers was later increased to ₹857 crore, accelerating subsidy disbursal in this category.
Electric Three-Wheelers Lead EV Adoption in India
India’s electric three-wheeler segment has emerged as a clear leader in EV adoption. In 2025 alone, nearly 750,000 electric three-wheelers were sold, up from 700,000 units in 2024. Of these, around 286,000 vehicles benefited directly from PM E-Drive subsidies since the scheme’s launch in FY25.
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Electric three-wheelers accounted for over 687,000 units, or nearly 60% of total three-wheeler sales in 2025, highlighting their dominance in the EV transition. In contrast, EV penetration in other segments remained modest, with electric cars making up about 4.8% (167,000 units) of total car sales and electric two-wheelers accounting for around 6.2% (1.2 million units).
Industry experts attribute this wide gap to the economic viability of electric three-wheelers, which benefit from lower operating and maintenance costs, high daily usage, and growing charging and battery-swapping infrastructure. Significant investments by manufacturers have also brought electric three-wheelers close to price parity with petrol and CNG models, especially when lifetime costs are considered.
L3 E-Rickshaws Struggle to Qualify for Subsidies
Despite strong overall sales, most L3 e-rickshaws have failed to qualify for PM E-Drive subsidies due to stringent localisation norms. Since FY25, only around 4,600 L3 e-rickshaws—just 0.55% of the estimated 830,000 units sold during this period—have received subsidies, according to official data.
The scheme mandates that 100% of key components of electric three-wheelers must be manufactured or assembled domestically, along with certification that at least 50% of the vehicle’s total value is generated in India. Manufacturers have faced challenges in localising gearboxes, traction motors, and motor controllers, which remain cost-intensive.
“E-rickshaws are affordable vehicles, and sourcing all spare parts locally increases costs by nearly ₹10,000 per vehicle,” said Pawan Kakkar, Managing Director of YC Electric Vehicles, which has sold about 35,000 e-rickshaws in 2025.
Subsidies Accelerating, Not Creating, Demand
Policy experts view the early exhaustion of funds as a sign of market maturity rather than dependence on subsidies. Amit Bhatt, India Managing Director of the International Council on Clean Transportation (ICCT), said the electric three-wheeler segment is now “running on autopilot”, with subsidies accelerating demand instead of merely initiating it.
However, Bhatt cautioned that EV adoption remains heavily concentrated in three-wheelers, and scaling electric mobility across two-wheelers and passenger vehicles remains a major challenge. “To sustain momentum, India must reduce upfront vehicle costs, particularly in the two-wheeler and car segments,” he noted.
Implications for India’s EV Roadmap
The early depletion of the ₹857-crore L5 subsidy pool underscores the success of electric three-wheelers as the backbone of India’s EV transition, while also highlighting the need for policy recalibration. As subsidies taper off, the focus is expected to shift toward cost reduction, localisation, financing support, and infrastructure expansion, ensuring that India’s EV growth remains sustainable beyond its earliest success stories.
Comment by Author:
The early exhaustion of the ₹857-crore PM E-Drive subsidy for L5 electric three-wheelers reflects the strong commercial viability of this segment rather than over-reliance on incentives. Rapid adoption, driven by lower operating costs and improving infrastructure, shows that electric three-wheelers have reached a level of market maturity.
However, as subsidies phase out, sustained growth will depend on continued cost reduction, deeper localisation, and wider access to financing and charging infrastructure to support India’s broader EV transition.
