India’s EV Push: Subsidies, Regulatory Shifts, and the Road to Cleaner Air

The air quality crisis in Northern India has led to a significant shift towards electric vehicles. In Delhi and the surrounding states, EVs are seen as a solution to reduce CO₂, NOx and particulate emissions from vehicles. The city’s draft EV Policy 2.0 has an aggressive target of 95% of new vehicle registrations being electric by 2027 – and even phases out CNG autos and old combustion vehicles to fight smog.

Illustration by The Geostrata

Delhi has ambitious subsidy plans (e.g. charging ₹10,000 per kWh up to ₹1 lakh for most new electric cars) and scrappage incentives to make EVs affordable. The state of Telangana also prohibited ICE vehicles from heavily polluted roads and exempted road tax/registration fees for all new EVs until the end of 2026 to encourage adoption. These state policies are in line with national objectives as EVs are a key part of India’s COP26 climate strategy and highlight the ways in which clean mobility is now linked to health and climate agendas.

STATE-LEVEL POLICY INNOVATION DRIVING EV ADOPTION

A number of states have begun to implement or have proposed groundbreaking EV programs.

In Delhi, the proposed EV Policy 2.0 (presented by Transport Minister Pankaj Singh in 2025) would position Delhi as an EV hub, aiming for 95% EV registrations by 2027 and a phased out of fossil-fuel autos, including auto-rickshaws and taxis, through a structured scrappage policy.

The draft also provides hefty new subsidies: for instance, electric two-wheelers receive a discount of ₹21,000 (₹30,000 for women buyers) and the first 27,000 electric cars under ₹25L will receive up to ₹1 lakh each in battery subsidies. Importantly, the draft also has provisions for retrofitting incentives - a maximum of ₹50,000 for converting each old petrol/diesel car into an EV, for the first 1000 conversions.

The goal of these measures is not only to incentivise new EV buyers, but also to remove older, polluting vehicles from the roads in Delhi. (Delhi already bans diesel cars over 10 years old and petrol cars over 15 years old on NGT/SC orders.

The new policy packages in Delhi, but come with trust issues given the history of delays. According to the 2020 EV policy, several owners are yet to receive the promised subsidies – a ₹48 crore backlog – and in 2025 the Delhi High Court directed the government to immediately pay pending EV incentives, reprimanding officials for using the absence of fixed timelines as an excuse to delay payments.

This kind of policy uncertainty has left consumers frustrated and highlights the importance of timely disbursal in order to maintain confidence in EV incentives. Other state programs of note include Telangana’s EV policy (November 2024) which provides a full waiver of road tax and registration fees for two years for all EVs from two-wheelers to buses, with the stated goal of promoting cleaner vehicles and reducing pollution. These tax breaks and subsidies are strong market signals that clean cars are desired.

RETROFITTING AND TRANSITION PATHWAYS IN LEGACY ICE MARKETS

The majority of the legacy internal combustion vehicles (cars, autos, trucks) that still ply on Indian roads are petrol, diesel, CNG or LPG-based. These ICE engines are major emitters of pollutants such as carbon dioxide (CO2, the primary greenhouse gas), carbon monoxide, nitrogen oxides (NOx) and particulate matter, all of which contribute to climate change and urban smog. 

Retrofitting existing vehicles to run on all-electric power is a bridging solution, in which the engine is replaced with a battery-motor system and there are no tailpipe emissions. Consistent with this, the draft EV policy in Delhi explicitly promotes retrofitting by providing a subsidy of Rs. 50,000 per vehicle for the first 1000 conversions; it is a means to “scrap and swap” old cars without requiring owners to immediately purchase new ones.

Regulatory scrappage is also employed by the government to dispose of old ICE vehicles: Delhi already bans vehicles over a certain age, and older engines are periodically deregistered under court orders. These measures over time force fleets to modernize. For instance, the Delhi EV policy would retire old 2Ws/3Ws/LCVs and provide additional incentives for their replacement with electric vehicles.

The transition pathway in ICE markets is essentially retire-or-convert, where the expensive, older, polluting buses, autos, or trucks are either scrapped or converted to electric, slowly moving the entire fleet to zero-emission drivetrains.

NATIONAL FRAMEWORKS AND MARKET SIGNALING THROUGH CENTRAL SCHEMES

At a national level, India has tied large funding to EV targets. The FAME-II scheme (Faster Adoption and Manufacturing of Electric Vehicles, Phase II) was budgeted at ₹10,000 crore for 2019-22, of which nearly 86% was set aside for consumer incentives. FAME-II sought to create demand by providing subsidies for about 7,000 electric buses, 550,000 electric passenger vehicles (including hybrids), 100,000 electric three-wheelers and 1,000,000 electric two-wheelers.

Interestingly, while FAME-II does provide incentives for public transport and commercial EVs, it also includes private e-2Ws. The government has also more recently introduced production-linked incentive schemes to promote the manufacturing of EVs. For instance, the 2024 Scheme to Promote Manufacturing of Electric Passenger Cars (SPMEPCI) offers capital incentives for the production of EVs in India, with the explicit goal of reducing oil imports and pollution.

There is also a more general PLI-Auto scheme (INR 25,938 cr over FY23-28), which has included EV parts and advanced auto tech, and by the end of 2025 had led to billions in investment in the EV sector and incentives for over 1.36 million EVs (2Ws, 3Ws, 4Ws, buses) manufactured.

These programs are market signals, and their goal is to speed up the EV supply chain by linking financial backing to local production. But the EV market in India is still largely dependent on imports. In 2025, it was determined that only 13% of the EV models being sold in India were eligible for PLI benefits due to the levels of domestic content in the vehicles; the remainder were disqualified because of the high levels of imported content.

The most critical components, lithium-ion cells, battery modules, electric motors, power electronics and semiconductors, are still mostly sourced from China or Taiwan. So far only Tata and Mahindra models (Nexon EV, XUV400) have qualified. The government’s incentives, therefore, not only increase demand, but also attempt to ‘make in India’ by luring international battery companies and OEMs. For example, India has offered a $2.4 billion battery PLI and roadshows in other countries to companies such as Tesla, LG and Panasonic.

EV ADOPTION, URBAN POLLUTION MITIGATION, AND ESG ALIGNMENT

The rapid EV push is explicitly framed as a pollution-control strategy. Leaders in Delhi have also acknowledged that the mass adoption of EVs will have a direct impact on the levels of PM2.5 and PM10 in the city’s air. This means that in practice, every two-wheeler or auto-rickshaw that is converted to electric stops spewing soot and NOx.

The city government is even considering allowing private EVs to function as shared cabs, in order to increase the utilisation of each car and reduce traffic emissions even more. For the individual transport operator, the shift is now mandatory, as drivers of age-restricted autos or taxis must purchase new electric models or be deregistered.

EG: all new Delhi taxis and autos must be EVs. starting 2025. Subsidies help offset this cost: for example, Delhi offers a ₹21,000 discount on each new electric scooter and an additional ₹30,000 for female riders, while Telangana’s tax exemption can save up to ₹2 lakh on an EV car.

Corporations also view EVs in terms of ESG (Environmental, Social, Governance). India’s auto manufacturers have committed to significant investments in EVs and batteries – Moody’s estimates that Tata, Mahindra and others will invest over $10 billion by 2030. These investments are in line with global climate commitments.

The mixed-policy environment is still a concern, in 2025 Tata and Mahindra even lobbied to keep hybrids out of government EV programs, as they feared that diluting the “EV-only” incentives would undermine investment in clean cars. In other words, India’s EV push is now a multi-pronged effort to clean city air, meet climate goals, and develop an atmanirbhar EV industry while also phasing out old polluting fleets through scrappage or retrofit.

CONCLUSION

India’s EV push is not merely a pollution-control effort but a high-stakes industrial transition. While ambitious state targets and central incentives signal strong political will, persistent subsidy delays, infrastructure gaps, and heavy reliance on imported battery components expose structural vulnerabilities.

Unlike China’s vertically integrated EV ecosystem, India is attempting to build demand, localize manufacturing, and enforce regulatory phase-outs simultaneously. The real test will not be the ambition of policy targets, but the credibility of execution. If implementation remains uneven, electrification may outpace institutional capacity; if coordinated effectively, but, India’s EV transition could become both an environmental reform and a strategic industrial breakthrough.

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BY CHIRAG JOSHI

TEAM GEOSTRATA

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