India's electric vehicle (EV) sector has witnessed a dramatic drop in funding between 2022 and 2024. The funding in India's EV industry has halved, falling from $808 million in 2023 to just $586 million in 2024. This decrease has been primarily attributed to a reduction in subsidies under the PM-E Drive scheme, which has raised concerns among investors.
In the previous years, the sector was experiencing rapid growth, but this slowdown in funding has coincided with a deceleration in industry growth. The growth rate has significantly dropped from 50% in previous years to just 24.5% in 2024. According to reports, 1.9 million electric vehicles were sold in 2024, but this is seen as a lower-than-expected performance, considering the sector's potential.
Investors have grown cautious and are seeking a more profitable environment before committing further capital. The government's move to scale back subsidies, especially in the FAME-II and PM-E Drive schemes, has added to investor concerns. Under the revised PM-E Drive scheme, subsidies based on battery power have been reduced significantly. The subsidy per kilowatt hour (kWh) was initially set at Rs 15,000 under the FAME-II scheme but has been reduced to Rs 10,000, covering only 15% of the vehicle's ex-factory price. Additionally, subsidies for electric four-wheelers and hybrid vehicles have been excluded from the new scheme, further dampening the outlook for these segments.
Despite the funding slowdown, there have been notable investments in the industry. Ather Energy, for example, successfully raised $71 million from the National Investment and Infrastructure Fund (NIIF), marking a significant milestone as the electric scooter maker entered the unicorn club. This demonstrates that while funding is down overall, select companies in the EV space continue to attract attention from investors. The challenges faced by the EV sector reflect a delicate balance between government incentives and the industry's long-term profitability, as the government works to reduce its reliance on subsidies.
