EV maker economics: PLI and PM E-DRIVE, how it works in India

The first source is the sale of vehicles. A company builds an electric two-wheeler, three-wheeler or car, sells it through dealers or online, and keeps the difference between the price and what it cost to build. Most of that cost is the battery pack, which is why the battery decides whether an EV company can reach a healthy margin.

The second source is government money tied to EVs. A demand subsidy lowers the price the buyer pays, and the company is reimbursed by the government. A production incentive pays the company a share of the sales value of vehicles or batteries it makes in India. Both can sit inside the revenue and other-income lines of the accounts, so a reader has to check how a company shows them.

A third, smaller source is everything around the vehicle: charging, software, spare parts, accessories and financing commissions. For most Indian EV makers these remain a small share of revenue.

FAME stands for Faster Adoption and Manufacturing of Electric Vehicles. The second phase, FAME II, ended on 31 March 2024. It was run by the Ministry of Heavy Industries and paid a fixed amount per kilowatt-hour (kWh) of battery capacity, capped as a share of vehicle price.

A short bridge scheme, the Electric Mobility Promotion Scheme (EMPS) 2024, ran for a few months in 2024. PM E-DRIVE (PM Electric Drive Revolution in Innovative Vehicle Enhancement) then started in October 2024 and covers electric two-wheelers, three-wheelers, buses, ambulances, trucks and charging infrastructure.

As of November 2026, reports say the scheme was extended to 31 March 2028 for electric two-wheelers through an amendment dated August 2026, with the outlay raised from ₹10,900 crore to about ₹11,900 crore. The e-3W category L5 segment closed earlier, in December 2025. Rules and budgets change, so the Ministry's current notification is the source to read.

For electric two-wheelers, the subsidy is set per kWh of battery capacity with a cap per vehicle. The rate was ₹5,000 per kWh with a ₹10,000 cap in the first year, and it was halved to ₹2,500 per kWh with a ₹5,000 cap for vehicles registered from 1 April 2025, according to recent coverage of the extension.

The buyer sees the subsidy as a lower price at the showroom. The maker then claims the money back from the government after meeting the scheme's conditions, so the company carries the cash gap until the claim is paid. Claims go through a government portal, and the scheme says that a component can be closed once its allocation is used up.

• FAME II: ended 31 March 2024.
• EMPS 2024: a short bridge in 2024.
• PM E-DRIVE: from October 2024, now reported as running to 31 March 2028 for e-2W.
• E-2W rate from April 2025: ₹2,500 per kWh, capped at ₹5,000 per vehicle (reported).
• Total outlay: about ₹11,900 crore after the August 2026 amendment (reported).

PLI means production-linked incentive. Instead of helping the buyer, it pays the manufacturer a percentage of incremental sales of products made in India, for a fixed number of years. Two PLI schemes matter for EVs.

PLI-Auto was approved in September 2021 with an outlay of ₹25,938 crore for advanced automotive technology products, including EVs, and it covers the financial years 2022-23 to 2026-27. A company must meet a minimum domestic value addition of 50%, which means at least half the product's value must come from Indian inputs and work.

PLI-ACC (advanced chemistry cell) was approved in May 2021 with ₹18,100 crore to build 50 GWh of battery cell capacity in India. It pays per kWh of cells sold and is tied to local value addition and to setting up the plant. The Ministry of Heavy Industries runs both, and progress reports have shown that payouts start slowly because factories take years to build.

A subsidy is a price cut paid by someone else. When it falls, the buyer's price rises or the company absorbs the loss. If a maker holds the price to keep volumes, its gross margin shrinks by the full amount of the cut. If it raises the price, demand can drop, especially in price-sensitive two-wheelers.

The size of the effect depends on the vehicle. A ₹5,000 reduction in subsidy on a ₹1 lakh scooter is 5% of the price, which is large next to a typical single-digit or low-double-digit gross margin. This is why the halving of the e-2W subsidy in 2025 showed up in sales announcements and price lists. The logic is the same as in gross and contribution margin.

Start with volume, then average selling price (ASP) per vehicle, then cost per vehicle. Ask how much revenue or profit came from incentives, because a company that makes a loss without them is not yet earning from the product.

Battery cost is the biggest line. A maker that builds its own packs or cells, or has a supply deal, can protect its margin better than one that buys at market prices. Warranty cost matters too, since the battery is the part buyers worry about.

• Volume: vehicles sold in the period.
• ASP: revenue per vehicle, with and without subsidy.
• Incentive income: PLI and other grants, shown separately if the company discloses it.
• Gross margin: after the battery and the other direct costs.
• Receivables from the government: money claimed but not yet paid.
• Cash burn: how long the money lasts at the current loss rate.

Check whether a profit includes one-time incentive income, and whether a quoted margin is before or after the subsidy. A headline that says a company turned profitable can hide a large share of incentive income. Look also at whether incentives are booked when received or when only applied for.

A headline about a subsidy extension is worth reading against the rate. An extension at a lower rate is a cut in disguise, and an extension at the same rate is a hold. Also note that the per-vehicle cap limits the help on larger batteries, so the effect differs between models.

Central schemes are not the only support. Electric vehicles carry a low rate of goods and services tax (GST), reported at 5% as of November 2026, and several states have offered their own purchase subsidies, road tax waivers or registration fee waivers. These change often and differ from state to state.

Each kind of support works differently. A tax cut lowers the sticker price for everyone, a demand subsidy lowers it for eligible vehicles, and a PLI pays the maker directly. This guide is general information and not investment or tax advice, so check the current scheme documents or a professional before relying on any figure.