India has decided to extend the PM E-DRIVE scheme till March 2028 to accelerate the adoption of electric two-wheelers. However, under the new arrangement, the subsidy per vehicle will be lower than before, while more electric two-wheelers will be able to benefit from it. The government’s move is aimed at supporting EV demand while also strengthening the domestic EV manufacturing ecosystem.
Let us understand the changes made to the PM E-DRIVE scheme in detail and what they mean for electric two-wheeler companies and investors.
What’s Happening?
The Ministry of Heavy Industries (MHI) has extended the subsidy for electric two-wheelers under the PM E-DRIVE scheme till 31 March 2028. According to the new notification, electric two-wheelers registered between 1 April 2025 and 31 March 2028 will get an incentive of Rs 2,500 per kWh, subject to a maximum of Rs 5,000 per vehicle.
However, the incentive available in FY 2024-25 was Rs 5,000 per kWh, with a maximum of Rs 10,000 per vehicle. This means the government has halved the subsidy per vehicle but extended the duration of the scheme. Along with this, fund support for the e2W segment has been increased by about Rs 1,000 crore to Rs 2,767 crore, allowing a maximum of 45,79,120 electric two-wheelers to be eligible for the subsidy.
What are the New Conditions of the Scheme?
To qualify for the incentive, the maximum ex-factory price of the electric two-wheeler has been fixed at Rs 1.5 lakh. The incentive will be limited to 15% of the vehicle’s ex-factory price or Rs 5,000, whichever is lower. An outlay of Rs 55 crore has been kept for the administrative expenses of the scheme.
This is a fund-limited scheme. If the funds are exhausted before 31 March 2028, the scheme or its sub-components will be closed, and no further claims will be accepted. The incentive rate per kWh will be reviewed from time to time based on the reduction in vehicle costs, and no claims can be submitted after 31 December 2027.
The e-3W (L5) segment was closed on 26 December 2025 as its target sales had already been achieved. Earlier, the incentive was available until July 2026, which has now been extended till FY28.
What Impact will it have on the EV Sector?
Following the announcement, shares of electric two-wheeler companies such as Ola Electric and Ather Energy rose by up to 5%. The number of vehicles eligible for the subsidy has increased from 2.4 million to 4.57 million, which has strengthened sentiment in the sector.
On the demand front, the sector has also maintained a strong pace of growth. According to VAHAN data, sales of electric two-wheelers increased from 2,52,787 in FY22 to 1.46 million in FY26, while sales of petrol two-wheelers declined from 13.2 million to around 11 million.
The government is now also focusing on the commercial EV segment. Discussions are underway on an interest-subvention mechanism and credit guarantees for electric trucks and buses, as there is a difference of 3 to 4 percentage points in the financing cost of electric and diesel trucks. In fact, heavy trucks account for only 3% of the total number of vehicles, but they are responsible for 42% of vehicular pollution and about 60% of diesel consumption.
The penetration of electric three-wheelers has crossed 41%, while the penetration of electric two-wheelers stands at 7.6%, below the government’s target of 9% to 10%. Under PM E-DRIVE, proposals for charging infrastructure worth Rs 710 crore to Rs 715 crore have been approved so far, while proposals worth Rs 190 crore are under consideration.
What Does This Mean for Investors?
This policy support can directly benefit listed EV companies such as Ola Electric and Ather Energy. However, the Q1 results showed a significant difference in the performance of the two companies. Ather Energy’s net loss declined from Rs 178 crore to Rs 51 crore, while Ola Electric’s net loss narrowed from Rs 428 crore to Rs 336 crore.
In terms of revenue, Ather Energy recorded revenue of Rs 1,217 crore, registering 88.8% YoY growth, and achieved EBITDA breakeven for the first time. On the other hand, Ola Electric’s revenue fell 45% to Rs 455 crore, marking a decline for the seventh consecutive quarter, while its EBITDA margin stood at negative 43%.
This means that the extension of the subsidy is positive for the overall sector, but investors will still need to closely track company-wise financial performance. Despite the subsidy support, Ola Electric’s cash flow from operations remained negative at Rs 215 crore, compared with a positive Rs 91 crore in the March quarter.
What’s Next?
The government expects to disburse incentives of about Rs 4,700 crore this year under electric vehicles and advanced automotive components. Meanwhile, the investment target under the Auto PLI scheme was Rs 42,000 crore, while companies have already invested more than Rs 45,000 crore. Apart from this, the government has allotted 14,028 electric buses to states, with a financial outlay of Rs 4,391 crore.
The direction ahead is clear: the government wants to maintain the pace of EV adoption across two-wheelers, buses and trucks. In the two-wheeler segment, despite the reduction in the subsidy rate, the extension of the scheme is aimed at supporting demand. However, as vehicle costs decline, there could be further reductions in the incentive.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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