EV Push Powers E-3W Growth, E-2W Adoption Stagnates at 4%: IEEFA

India's electric mobility journey revealed a nuanced landscape where policy effectiveness varies across vehicle segments and market maturity stages, according to an IEEFA report. Its report, “From Incentives to Adoption: A Decadal Review of India’s EV Subsidy Effectiveness” found the electric three-wheeler (E3WC) segment growth demonstrates how well-designed state policies can effectively complement central initiatives, with implementing states reporting 30% higher sales compared to non-implementing states.  Moreover, it found significant causal evidence of policy impact on adoption rates, with states having policies showing 8.4 percentage points higher adoption rates compared to states without policies. 

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The study also showed that commercial four-wheelers represent a promising frontier, with combined FAME-II and PLI mechanisms driving substantial growth despite competition from CNG alternatives. Additionally, the e-bus segment, highlights that incentives alone cannot overcome structural barriers related to procurement, financing and operational complexity. India needs other similar initiatives and it recommends that policymakers must recognise that each EV segment requires tailored intervention, especially as transitions from FAME schemes to PM E-DRIVE. 

State policies had minimal impact on an already well-established E3WP segment

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IEEFA's Difference-in-Differences DiD analysis showed statistically insignificant effects of state policy implementation on E3WP market development. The study explained "State policy shows a slightly positive but statistically insignificant impact on sales. This limited impact of state policy can be understood through the timing of policy interventions."

It explained, "By the time states began introducing EV policies, FAME-I had successfully helped E3WP to capture the market. During FAME-I, the market demonstrated extraordinary growth rates, reflecting successful market catalysis in the segment’s formative years. The timing of state interventions, coming after this crucial market establishment phase, likely had limited incremental impact."

Our SCM-based counterfactual analysis of the E3WP market, presented in Box 2, reinforces these findings, highlighting how market maturity and pre-existing adoption levels influence the effectiveness of subsequent policy interventions. Notably, even FAME-II’s higher purchase subsidies, introduced in April 2019, did not have a significant direct impact on sales or adoption rates, suggesting that the segment had evolved beyond being primarily driven by purchase incentives. 

The study showed a relationship between state policy intensity and market outcomes, which indicated that well-designed
state support can effectively complement central initiatives. This is especially relevant for the E3WC segment, which was in the early stages of market development when most state policies were implemented, unlike its more mature passenger counterpart. The segment’s transformation from merely 18 units in 2015 to 1,246 by the end of FAME-I (March 2019) and to 62,348 units (signifying an adoption rate of 31%) by December 2023 reflects this policy-supported evolution.