Introduction: The End of an Era

For over a decade, the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been the backbone of India's EV revolution, particularly for two-wheelers (2Ws) and three-wheelers (3Ws). As FAME-II officially concludes in 2026, a critical question looms: what comes next? This isn't just a policy transition—it's a market inflection point. Industry professionals, fleet owners, and everyday buyers are all asking the same thing: Will subsidies continue? If yes, in what form? And how should we prepare for a future where incentives may be smaller, but more strategic?

In this comprehensive guide, we decode the signals from the government, analyze emerging policy drafts, and offer actionable insights for every stakeholder in India's EV ecosystem. Whether you operate a last-mile delivery fleet or are considering your first electric scooter, understanding the future of subsidies is essential to making sound financial and operational decisions.

What FAME-II Delivered for 2W and 3W EVs

FAME-II, launched in 2019, was a game-changer. It provided demand incentives that directly reduced the upfront cost of electric two-wheelers and three-wheelers, making them competitive with their internal combustion engine (ICE) counterparts. The scheme also funded charging infrastructure, creating a foundation for the ecosystem. Key outcomes include:

1. Over 1.5 million electric two-wheelers sold under the scheme, driving a 300% growth in sales from 2020 to 2025.
2. Substantial cost reduction: Incentives of up to ₹15,000 per kWh made electric scooters like the Ola S1 Pro and Ather 450X accessible to middle-class buyers.
3. Boost to local manufacturing: The phased manufacturing programme (PMP) pushed OEMs to localize battery packs and motors, reducing import dependence.
4. Early adoption in 3W cargo and passenger segments, with e-rickshaws and e-autos becoming common in cities like Delhi, Bengaluru, and Pune.

However, FAME-II was not without criticism. Several OEMs were found to be misusing the scheme by overstating local content, leading to policy audits and stricter compliance norms. This has shaped the cautious approach to future policy design.

The FAME-II Sunset: What We Know

As of August 2026, FAME-II has officially ended. The government has not yet announced a direct successor, but multiple signals indicate a shift from blanket subsidies to targeted interventions. The Ministry of Heavy Industries (MHI) and NITI Aayog have released consultation papers suggesting that future support will focus on:

• Battery swapping infrastructure, especially for 3W cargo and passenger vehicles.
• Advanced chemistry cell (ACC) manufacturing under the PLI scheme to reduce battery import dependency.
• Operational incentives for fleet operators, such as per-kilometer subsidies for electric autos and delivery scooters.
• Creation of EV-only zones in cities with strict ICE phase-out timelines.

The next phase will be less about purchase price reduction and more about total cost of ownership (TCO) enhancement through infrastructure, financing, and circular economy models.

Emerging Policy Signals from NITI Aayog and MHI

In its 2026 draft EV policy roadmap, NITI Aayog has proposed a three-pillar strategy: Demand Creation, Supply Chain Resilience, and Circularity. Key proposals include:

1. Scrappage incentives: A voucher-based system for replacing old ICE two-wheelers and three-wheelers with EVs, similar to the vehicle scrappage policy for cars.
2. Battery-as-a-Service (BaaS) subsidies: Direct subsidies to battery-swapping operators (e.g., Sun Mobility, Battery Smart) to reduce swap costs for end-users.
3. Green financing: Interest subvention of 2-3% on EV loans for 2W and 3W purchases, especially for first-time EV buyers.
4. State-wise EV targets: Maharashtra, Gujarat, and Karnataka are already developing local subsidy top-ups to compensate for the central scheme's phase-out.

These signals suggest that the future incentive regime will be more granular, data-driven, and performance-based, rather than a one-size-fits-all subsidy.

Battery Swapping and Standardization: The New Frontier

One of the most talked-about shifts is the emphasis on battery swapping, particularly for 3W EVs and delivery fleets. The government has already released interoperability standards for EV batteries (BIS IS 17017), and future subsidies are likely to be linked to the adoption of standardized, swappable battery packs. This has major implications:

• Reduced upfront cost: Buyers can purchase the vehicle without the battery, cutting the initial price by 30-40%.
• Lower range anxiety: Swapping takes under 2 minutes, making it ideal for commercial applications.
• Battery health management: Centralized swapping stations can ensure proper charging cycles, extending battery life.
• Potential for grid balancing: Swapped batteries can be charged during off-peak hours, reducing grid stress.

However, challenges remain—lack of universal connector standards, varying voltage requirements across OEMs, and the high capital cost of setting up swap stations. The future policy is expected to address these through capital subsidies and public-private partnerships.

Production-Linked Incentive (PLI) and Its Role

While demand-side subsidies are tapering, supply-side incentives like the PLI for ACC batteries are gaining momentum. The government has committed ₹18,100 crore to boost domestic battery manufacturing, with a capacity target of 50 GWh. For 2W and 3W OEMs, this translates to:

1. Reduced battery costs: Local cell production could lower battery prices by 10-15% within 2-3 years.
2. Secure supply chains: Less reliance on imports from China, mitigating geopolitical risks.
3. Export potential: Indian-made batteries could become competitive in South Asian and African markets.

The PLI scheme is already attracting investments from Tata Chemicals, Amara Raja, and Exide, and is expected to be a cornerstone of India's EV policy landscape, even as demand subsidies decline.

State-Level Initiatives: Beyond Central Schemes

With central subsidies winding down, states are stepping up. Some notable examples:

These state-level policies are critical for fleet owners, who can aggregate benefits across multiple jurisdictions. However, this patchwork of incentives also adds complexity—something the industry hopes will be streamlined in future national policies.

What Fleet Owners and Individual Buyers Should Expect

For fleet owners operating last-mile delivery or passenger transport, the future is about operational efficiency. Without large upfront subsidies, TCO becomes the primary metric. Key predictions:

• Financing innovation: More OEMs and NBFCs will offer battery leasing and pay-per-use models.
• Telematics-linked subsidies: Future incentives may be tied to actual utilization and energy consumption data, encouraging efficient driving.
• Fleet aggregation: Larger fleets will negotiate better deals with OEMs and battery providers, making consolidation more attractive.
• Focus on durability: With lower replacement incentives, fleet operators will prioritize vehicles with longer battery warranties (e.g., 5 years / 80,000 km).

For individual buyers, the message is clear: while purchase subsidies may shrink, the long-term savings from lower fuel and maintenance costs remain compelling. A typical electric scooter already offers a 40-50% TCO advantage over petrol scooters, even without subsidies, at current fuel prices.

Impact on Total Cost of Ownership (TCO)

To put things in perspective, here's a comparative TCO breakdown for a popular electric scooter (e.g., Ola S1 Pro) versus a comparable petrol scooter (e.g., Honda Activa 6G) over 5 years / 50,000 km, assuming a modest ₹10,000 subsidy in 2027:

Even with a reduced subsidy, the electric scooter remains competitive. If battery prices fall further (as expected), the EV will outpace ICE economics without any subsidy.

Preparing for a Subsidy-Light Future

The end of FAME-II is not a death knell but a transition to maturity. Here's how different stakeholders can prepare:

1. For OEMs: Invest in localized supply chains, focus on LFP and sodium-ion battery tech for cost reduction, and build BaaS partnerships.
2. For fleet operators: Conduct comprehensive TCO modeling, explore battery leasing, and adopt telematics for energy optimization.
3. For individual buyers: Look for vehicles with high efficiency (Wh/km) and long battery warranties. Factor in total ownership cost, not just purchase price.
4. For charging and swapping providers: Align with government interoperability standards and explore dynamic pricing based on grid load.

The next five years will separate the pioneers from the followers. Those who adapt to a subsidy-light, efficiency-driven market will lead India's EV transformation.

Opportunities in Used EV Batteries and Recycling

One often overlooked aspect of subsidy policy is the circular economy. Used EV batteries (especially from 3W fleets) can serve as second-life storage for solar rooftops or grid peak shaving. The government is likely to introduce:

• Extended producer responsibility (EPR) mandates for battery recycling.
• Tax benefits for recycling plants and second-life battery integrators.
• Creation of a battery passport system to track health and reuse potential.

This creates a new revenue stream for fleet owners and reduces the effective cost of battery ownership—a key factor in future TCO models.

Expert Perspectives: Industry Voices

The industry is ready for a phase where subsidies are rationalized, but we need a clear, long-term policy framework that gives confidence to investors and consumers alike. The focus must shift to infrastructure and financing.

Battery swapping and PLI are the pillars of the next phase. We need to ensure that swapping standards are truly open and that domestic cell manufacturing achieves global cost parity within 3 years.

India's EV future is not subsidy-dependent; it is innovation-dependent. The government's role is to de-risk early adoption and then step back for market forces to take over.

Conclusion: A Maturing Market

The sunset of FAME-II marks a pivotal moment for India's electric two-wheeler and three-wheeler ecosystem. While the loss of upfront subsidies may seem daunting, it's a sign of a maturing market that is increasingly cost-competitive on its own. The future lies not in large, untargeted discounts, but in strategic investments in infrastructure, battery technology, and financing models that lower the total cost of ownership.

For buyers and fleet owners, the message is optimistic: even with reduced incentives, EVs offer compelling economics, especially as fuel prices rise and battery costs decline. For the industry, the challenge is to innovate, localize, and build sustainable business models. India's EV story is far from over—it's entering its most exciting chapter.

At EVXpertz, we will continue to track these developments closely, providing you with expert analysis, technical insights, and practical guidance to navigate the evolving landscape. Stay tuned, and stay charged.