India's EV Subsidies Hit Mark Unevenly: Two-Wheelers Outshine Cars
Overview
A new study shows India's electric vehicle subsidies yield better emissions reductions from two-wheelers than cars. Electric two-wheelers cut CO2 nearly twice as efficiently per rupee spent, primarily because India's coal-heavy grid diminishes the advantage for electric cars. This makes two-wheelers a more cost-effective climate intervention currently, prompting calls for more targeted government support.
EV Subsidies Deliver Uneven Climate Gains
India's push to promote electric vehicles (EV) as a climate solution is yielding uneven results. Electric two-wheelers are delivering far greater emissions reductions per rupee of public support than electric passenger cars, according to a new analysis by the Centre for Social and Economic Progress (CSE P).
The study assessed the climate impact of government subsidies and tax incentives for EVs, comparing them with other mitigation options like rooftop solar and offshore wind. It found that electric two-wheelers avoid nearly twice as much carbon dioxide (CO2) per rupee of government support as electric passenger cars.
Why Two-Wheelers Lead
Researchers attribute this efficiency to significantly higher incentives for electric cars, combined with their relatively modest emissions advantage over conventional vehicles. This advantage is constrained by lower energy efficiency and India's coal-dominated electricity grid, which accounts for nearly three-quarters of generation. By contrast, two-wheelers, already a large part of India's vehicle fleet, require lower subsidies while delivering stronger emissions reductions.
Cost-Effectiveness Compared to Renewables
The analysis reveals that cutting a tonne of CO2 through electric passenger cars costs the government substantially more than clean power options like residential rooftop solar or offshore wind. The cost of emissions abatement through EVs is comparable only to green hydrogen, a technology still in its early stages.
Global Benchmarks and Indian Effort
While India's incentives for electric cars are lower than those in Norway, the United States, and China, the study finds India achieves greater CO2 abatement per unit of incentive. However, when adjusted for purchasing power parity (PPP), India's effective incentive per tonne of CO2 avoided becomes nearly four times higher than its nominal value, indicating a substantial fiscal effort relative to income levels.
Shifting Focus for Future Gains
EV sales in India have surged from 0.6% to 7.5% of total vehicle sales since the 2018-19 financial year. CSEP recommends prioritizing segments that are harder to electrify and offer higher climate benefits, such as buses and freight vehicles. They also suggest gradually scaling back subsidies for private electric cars once they achieve cost parity with petrol and diesel models.
The report concludes that while EVs are not a climate silver bullet, they remain India's most viable long-term option for decarbonizing road transport. The challenge lies in ensuring public spending on EVs delivers genuine climate gains.
