EV two-wheeler sales soared 34x in 4 years, but market share stuck at 4%: Study
In the electric two-wheeler (E2W) segment, sales jumped from 19,333 units in FY2019 to over 6.5 lakh units in FY2023. However, the adoption rate – the share of electric vehicles in overall two-wheeler sales – was only 4% by the end of 2023. 'FAME-II's higher subsidy intensity (28.65%) compared to FAME-I (14.32%) boosted absolute E2W sales by up to 9 times, but had limited impact on the overall market composition,' the report states.
According to Charith Konda, Energy Specialist at IEEFA and one of the co-authors, 'The government should continue offering purchase subsidies to sustain momentum but clearly communicate a phased-down trajectory for the longer term.'
In the electric three-wheeler passenger (E3WP) segment, early policy support under FAME-I drove a 10x market multiplier effect. Around 27,000 additional vehicles were directly attributed to subsidies under FAME-I, with total sales reaching 2.67 lakh units by March 2019. The segment, however, matured during the FAME-II period and showed limited incremental impact from later subsidies.
The electric three-wheeler cargo (E3WC) category saw a market share rise from 0.03% in 2015 to over 31% by 2023. The study found this growth was largely driven by operating cost advantages rather than central subsidies. A 1% reduction in operating cost led to a 0.563% increase in sales, highlighting the role of business economics in commercial segments.
In the electric four-wheeler commercial (E4WC) category, sales improved after FAME-II and PLI schemes were implemented. A one-standard-deviation increase in subsidy intensity led to a 5% rise in sales. However, the adoption rate was still less than 1%. States that implemented incentives saw 211% higher sales growth than those that did not.
For electric four-wheelers in the private segment (E4WP), sales grew due to new model launches and consumer demand, but adoption rates remained below 2%. The report highlights the need for continuing support in this segment.
The report found that both FAME-I and FAME-II failed to make a statistically significant impact on electric bus (e-bus) adoption. Only 4,766 units were subsidised against a target of 7,262, and the sector continues to face structural barriers such as limited financing access and high upfront costs.
'Coordinated central and state action, pairing targeted purchase incentives, infrastructure rollout, and manufacturing scale-up can help electric cars compete effectively with their counterparts in India's commercial vehicle market,' said Saurabh Trivedi, Sustainable Finance Specialist at IEEFA.
The study recommends continued fiscal support, investment in public charging infrastructure, interest rate subvention for buses, and targeted financing support for smaller commercial operators.
'As India transitions from FAME schemes to PM E-DRIVE and other similar initiatives, policymakers must recognise that each EV segment requires tailored intervention,' Konda added.
The report draws on panel data of 21,526 observations over 10 years, offering a first-of-its-kind empirical assessment of India's EV subsidy performance using econometric techniques such as difference-in-differences and synthetic control methods.
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