Top two-wheeler makers urge govt to extend key subsidy scheme
India’s top two-wheeler OEMs have urged the ministry of heavy industries to extend PM E-Drive subsidies beyond March 2026 to utilize remaining funds.
Bengaluru/New Delhi: The country’s largest two-wheeler makers, including Hero MotoCorp, Bajaj Auto, and TVS Motor Co., have sought an extension of the subsidies for the manufacture of electric two-wheelers beyond March this year, arguing that a fourth of the vehicles targeted are yet to claim incentives.
A formal representation has been made through the Society of Indian Automobile Manufacturers (Siam) to the ministry of heavy industries (MHI) for extending the scheme in the last few weeks, according to three executives aware of the matter.
The industry has sought the continuation of e2W subsidies under the PM E-Drive scheme because allocated funds should not remain unutilised, said the first industry executive requesting anonymity.
"Some companies have stopped claiming incentives under the scheme, since they failed to meet localization criteria after the rare earth magnets supply issue. And whether they choose to claim incentives later or not, funds allocated for e2Ws will be left by March," said this executive.
- About 590,000 electric two-wheelers remain eligible for subsidies before the 2.48 million-unit target is met.
- The ‘rare-earth magnet’ crisis caused by China significantly hindered Indian manufacturers' ability to meet the localization requirements needed to claim subsidies.
- EV penetration in the 2-wheeler segment is stagnant at 6.3%, barely moving the needle compared to 2024.
- The MHI has previously stated the scheme is ‘fund-limited’, creating a precedent that might work against the industry if the government sticks to the March date.
- The current incentive covers about 10% of the price of a sub- ₹1 lakh scooter; its removal would result in immediate price hikes for consumers.
Under the PM E-Drive scheme, the government set a target to incentivise the purchase of about 2.48 million e2Ws, allocating ₹1,772 crore. Two-wheeler makers can claim incentives up to ₹10,000 per scooter sold, which is over 10% of the average price of an electric scooter priced below ₹1 lakh.
The government launched the ₹10,900 crore PM E-Drive scheme in September 2024 to incentivise two-wheelers, three-wheelers, electric trucks and buses, as well as charging infrastructure. While the scheme was slated to run till March 2026, it was extended till March 2028 for electric trucks and buses.
According to the scheme's official dashboard, the government has supported purchases of about 1.89 million electric two-wheelers as of 21 January 2026.
Tough competition from ICE
The second executive mentioned above noted that an extension until the funds are utilised can last 3-6 months, depending on the claims submitted by the companies.
“No one wants to leave funds unutilized," the executive mentioned.
Queries sent to MHI, Siam, Hero MotoCorp, Bajaj Auto, TVS Motor, Ather Energy, Ola Electric, and Honda Motorcycle and Scooter India went unanswered.
The industry’s pitch for more subsidies also comes amid anxiety over slowing EV penetration following the goods and services tax (GST) cuts on internal combustion engine (ICE) vehicles in September.
EV penetration in two-wheelers fell from 8% in September to 4.5% in October after the GST cuts. The penetration levels remained the same in November, before recovering to 7.4% in December, but still remain below the pre-GST cuts levels.
In 2025, electric two-wheelers grew 11% to 1.2 million sales, which was just a tad better than the 7% growth in overall two-wheeler sales to 20.3 million, according to Federation of Automobile Dealers Associations (Fada) data. Penetration of electric vehicles in the two-wheeler industry grew just marginally from 6.1% in 2024 to 6.3% in 2025.
The slow growth, despite a smaller base, came during a year when almost all electric two-wheeler makers grappled with a rare-earth magnet crunch due to restrictions imposed by China.
The developments also come after subsidies for electric three-wheelers were fully utilised three months ahead of schedule in December, with the government ending support for electric three-wheelers under the PM E-Drive scheme.
Govt response
Mint reported on 26 December that the ministry told the industry lobby group it would stop granting incentives once the scheme's target of 288,809 L5 three-wheelers was reached, or on 26 December, whichever came first.
“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 are exhausted, no further claims will be entertained," the letter read.
This came after the ministry of heavy industries notified in August that while the PM E-Drive scheme will run until the financial year 2028, subsidies for electric two-wheeler and three-wheelers will end by March 2026.
But with funds for two-wheelers still not fully utilised, company executives are lobbying the government to extend the scheme for a bit longer.
“Both industry and government would not want the funds to remain unutilised. We are confident that an extension will be granted," the first executive added.
Analysts suggest that industry demand for an extension of the electric two-wheeler scheme would make sense if the desired targets have not been met and funds remain utilised.
“The government’s direction is clear about tapering out subsidies. However, an extension for a short period can be granted if the targets which were set have not been fulfilled. Full utilisation of funds will be ideal for everyone involved as it has already been budgeted," Ashim Sharma, senior partner and group head at Nomura Research Institute, said.
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