EV funding in India drops 37% from 2022 to 2024 amid policy, sales slowdown

The PM-E drive, scheme launched in October, excludes subsidies for electric four-wheelers and hybrid vehicles, significantly impacting equipment manufacturers

India’s electric vehicle (EV) sector has witnessed a sharp decline in funding, dropping from $934 million in 2022 to $586 million in 2024, according to a report by The Economic Times citing Venture Intelligence data.

 

This decline, attributed to policy changes and slower sales growth, has driven investors to prioritise unit economics and profitability before committing capital. While the number of deals in 2024 remained steady at 44, the funding volume highlights a ‘cautious investment approach’, the news report said.

Transition from FAME-II to PM-E drive scheme

Government policies have always played a pivotal role in shaping the trajectory of the EV sector. The PM-E drive scheme, introduced in October, replaces the FAME-II programme and aims to phase out subsidies gradually. Under the new policy, incentives for electric two-wheelers are capped at Rs 5,000 per kilowatt-hour (kWh) for the first year, with a maximum subsidy of Rs 10,000 per vehicle. 

   

In contrast, FAME-II had provided higher incentives of Rs 15,000 per kWh, covering up to 40 per cent of a vehicle’s cost, which was later reduced to Rs 10,000 per kWh in 2023.

 

The PM-E drive scheme notably excludes subsidies for electric four-wheelers and hybrid vehicles, a move that has impacted original equipment manufacturers (OEMs) significantly.

Major deals amid reduced investor confidence

Despite the overall decline in funding, the sector saw a few high-profile investments. Ather Energy secured $71 million from the National Investment and Infrastructure Fund (NIIF), attaining unicorn status and setting the stage for an upcoming IPO. However, such large deals have become exceptions in a more cautious funding environment.

Slower growth in EV sales

The growth rate in EV sales has also decelerated. While over 1.9 million EVs were sold in 2024 — representing a 24.5 per cent increase from 1.5 million in 2023 — this marks a significant slowdown compared to the 50 per cent growth seen between 2022 and 2023. Data from the government’s Vahan platform indicates that the electric two-wheeler segment, which includes companies like Ola Electric, accounted for 1.13 million of these sales in 2024, up from 860,000 units in 2023, the report said.

 

Despite challenges, the Indian government’s target of 30 per cent EV penetration in new vehicle registrations by 2030 continues to drive optimism. Investors are shifting focus to emerging areas such as component manufacturing, battery swapping, charging infrastructure, and financing. These segments are gaining traction and attracting fresh capital.

 

Battery swapping, in particular, has seen notable growth. The Economic Times report quoted Pulkit Khurana, co-founder of Battery Smart, saying there has been a rising adoption of battery swapping in commercial applications like quick commerce and food delivery.

 

Battery Smart surpassed 55 million swaps last month and is conducting over 100,000 swaps daily, he said. Battery Smart raised $65 million at a $340 million valuation in a funding round led by LeapFrog Investments in June. 

Credit: PIB

What is the PM-E drive subsidy scheme for EVs?

The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM-E drive) scheme was launched on October 1, 2024, with a budget of Rs 10,900 crore. This initiative aims to accelerate the adoption of electric vehicles (EVs) by providing demand incentives for various categories, including electric two-wheelers (e-2Ws), three-wheelers (e-3Ws), e-buses, and e-ambulances, among others. The scheme will run until March 31, 2026, and also focuses on establishing essential charging infrastructure and enhancing the domestic EV manufacturing ecosystem.

 

To streamline the subsidy process, an e-voucher system has been introduced. Customers will receive an Aadhaar-authenticated e-voucher at the time of purchase, which will reduce the upfront cost of their EV. This e-voucher can be downloaded via a link sent to the customer’s registered mobile number.