India's automotive industry leaders are making a concerted push for continued government support in the electric vehicle transition. The country's top two-wheeler manufacturers have formally urged the Ministry of Heavy Industries to extend the PM E-Drive subsidy scheme beyond its current March 2026 deadline, citing significant unutilized funds and unmet targets.
Industry Leaders Unite for Subsidy Extension
Major players including Hero MotoCorp, Bajaj Auto, and TVS Motor Company have collectively approached the government through the Society of Indian Automobile Manufacturers (SIAM) in recent weeks. Their formal representation argues that approximately one-fourth of the targeted electric two-wheelers have yet to claim incentives under the existing scheme.
"The industry has sought continuation of e2W subsidies under the PM E-Drive scheme because allocated funds should not remain unutilized," revealed an industry executive who requested anonymity. This sentiment reflects broader concerns about maximizing the impact of government investments in electric mobility.
Critical Numbers Behind the Request
The data reveals compelling reasons for the extension request:
- Approximately 590,000 electric two-wheelers remain eligible for subsidies before reaching the 2.48 million-unit target
- The government has supported purchases of about 1.89 million electric two-wheelers as of January 21, 2026
- Under the PM E-Drive scheme, ₹1,772 crore was specifically allocated for e2W incentives
- Manufacturers can claim up to ₹10,000 per scooter sold, representing over 10% of average prices for sub-₹1 lakh models
Challenges Hindering Progress
The electric two-wheeler sector faces multiple headwinds that have slowed adoption. The "rare-earth magnet" crisis caused by supply restrictions from China has significantly hampered Indian manufacturers' ability to meet localization requirements necessary for claiming subsidies.
"Some companies have stopped claiming incentives under the scheme since they failed to meet localization criteria after the rare earth magnets supply issue," explained the industry executive. This technical challenge has created unexpected barriers to subsidy utilization.
Market Dynamics and Competitive Pressure
The industry's subsidy extension request comes amid concerning market trends. Electric vehicle penetration in the two-wheeler segment remains stagnant at 6.3%, showing minimal movement from 2024 levels. This stagnation follows GST cuts on internal combustion engine vehicles in September, which temporarily reduced EV penetration from 8% to 4.5% in October.
While December saw recovery to 7.4%, penetration remains below pre-GST cut levels. In 2025, electric two-wheelers grew just 11% to 1.2 million sales, barely outperforming the 7% growth in overall two-wheeler sales to 20.3 million units.
Government Position and Industry Optimism
The Ministry of Heavy Industries has previously emphasized that the PM E-Drive scheme is "fund-limited," creating a precedent that could work against extension requests. However, industry representatives remain hopeful.
"Both industry and government would not want the funds to remain unutilized. We are confident that an extension will be granted," added the first executive. This optimism stems from the mutual interest in maximizing scheme effectiveness.
Analyst Perspectives on Extension Viability
Industry analysts suggest logical grounds for considering an extension. "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," noted Ashim Sharma, Senior Partner and Group Head at Nomura Research Institute.
Sharma emphasized that "full utilization of funds will be ideal for everyone involved as it has already been budgeted," highlighting the economic rationale behind the industry's request. The potential extension period is estimated at 3-6 months, depending on claim submission patterns.
Broader Scheme Context and Precedents
The ₹10,900 crore PM E-Drive scheme launched in September 2024 aims to incentivize two-wheelers, three-wheelers, electric trucks, buses, and charging infrastructure. While originally slated to run until March 2026, it was already extended to March 2028 for electric trucks and buses.
The current situation follows the complete utilization of subsidies for electric three-wheelers three months ahead of schedule in December, with government support ending for that segment under the scheme. This precedent of early fund exhaustion in one segment contrasts with the underutilization in the two-wheeler category.
As the March deadline approaches, the automotive industry awaits government response to their extension request, balancing fiscal responsibility with the need to accelerate India's electric mobility transition.
