The government of India’s ambitious FAME II (Faster Adoption and Manufacturing of Electric Vehicles in India) Scheme, which was announced in March 2019 with a budget of around Rs 10,000 crore did not achieve the desired results due to its stringent criteria and multiple challenges for industry players to meet the same.
Now, in a notification, the Department of Heavy Industry Ministries has announced partial amendments to the scheme which is expected to help drive higher adoption of electric two-, three-wheelers and buses.
As per the revision in the FAME II scheme, the ministry has announced a demand incentive of Rs 15,000 per KWh for electric two-wheelers. This is almost double the existing subsidy, with a maximum cap at 40 percent of the cost of vehicles. This would translate to an incentive of at least Rs 45,000 for an electric two-wheeler meeting the FAME II criteria.
On the electric three-wheeler front, the Heavy Industry believes "aggregation will be the key method for bringing the upfront cost of electric three-wheelers at an affordable level and at par with ICE three-wheelers." For this, the <inistry says the state-owned Energy Efficiency Services (EESL) will come out with an aggregate demand for 300,000 electric three-wheelers for multiple user segments. The details will be worked out by EESL for implementation.
Lastly, for electric buses, the Heavy Industry Ministry had detailed that cities with 4-million-plus population – Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune – will be targeted. EESL will again go for aggregation of demand in these cities for the remaining e-buses on OPEX basis. The details shall be worked out by EESL for implementation.
EV Industry lauds the move as a game-change
Sohinder Gill, Director General, Society of Manufacturers of EVs
“It’s an important and admirable decision taken by the government, a move that will bring down the prices of electric two-wheelers nearer to the IC vehicles and remove one of the biggest blockade of the high sticker price of electric two-wheelers. A City Speed electric scooter with a range of 100km/charge will now cost less than Rs 60,000 and a high-speed scooter with a range of 80km will come nearer to the Rs 100,000 price-tag. Together with the other important factors like extremely low running cost, low maintenance and zero emission, such price levels will surely spur a substantial demand of electric two-wheelers. We believe the time has come for mass adoption of electric two-wheelers and such initiatives coupled with a mass awareness campaign by the government and easy terms financing by public sector banks will bring us closer to the target of 30% of the two-wheeler market becoming electric in 5 years.”
Tarun Mehta, CEO and co-founder Ather Energy
“The revision in the FAME policy, increasing the subsidy by 50% per KWh is a phenomenal move. Sales of electric two-wheelers have grown despite the pandemic and with this additional subsidy, we expect electric two-wheeler sales to disrupt the market, and clock over 6 million units by 2025. Ather Energy already has plans to expand distribution to 30 cities in the next 6 months and this increased subsidy will help accelerate consumer demand, immensely. The government's continued support to drive adoption of EVs, with a keen focus on locally built electric two-wheelers will make India the manufacturing hub of EVs.”
Sudarshan Venu, Joint MD, TVS Motor Company:\
“We welcome the government’s continued support to EVs. Sustainable mobility solutions are very important for the future and TVS is investing significantly behind this. The improved incentives for electric two wheelers will increase penetration. Such policy direction should lead to indigenous development of future technology.”
Bhavish Aggarwal, Chairman and Group CEO, Ola
“I welcome the government’s amendment to the FAME II subsidy. The incentive of Rs15,000 per KWH will help make electric two-wheelers affordable for many more consumers. I believe India has the potential to lead the world in sustainable mobility and become a big market as well as a global EV manufacturing hub. Our Ola Futurefactory will be coming online soon and we will be aggressively pricing our range of electric scooters. With the policy incentives, we will be able to accelerate the global transition to sustainable mobility even faster.”
Jeetender Sharma, MD and founder, Okinawa Autotech
"The electric two-wheeler industry is once again experiencing a positive sentiment and a high level of interest from the government of India. The government of India's revisions to FAME-II subsidies are a welcome step that will only add zeal to the adoption of EVs. Lowering the prices of electric scooters in the country will really help to persuade more riders to switch from a combustion-engined model to an electric one. We have always emphasised the importance of creating an ecosystem for EV mobility, and this new revision to the FAME II scheme is an important step in that direction."
Rahul Sharma, founder, Revolt Motors
“The modification in the FAME India Phase 2 scheme will prove to be a game changer. The increase in financial incentive will further help in boosting adoption of products in the category and is a reinforcement of government’s commitment and intent for the EV industry. We are very pleased with this development as Revolt plans to reopen booking and further expand into newer markets. Such interventions coupled with the ongoing focus on infrastructure development can accelerate the growth of the sector immensely.”
Suhas Rajkumar, founder and CEO, Simple Energy
"The increase in the subsidy is very exciting and positive news for the electric two-wheeler industry. Manufacturers like us will benefit as this move will significantly improve the unit economics and accelerate the EV adaption as it becomes much more affordable. This will be the right push for the industry which is still considered to be at a nascent stage. Our pricing would also be affordable as the announcement has come in right before the launch of our flagship product (Simple Energy Mark 2) on August 15, this year."
Anant Jain, head – Market Intelligence – India, GfK
“The electric vehicle segment in India has immense potential to generate a lasting impact on the ecosystem of automotive sector despite being in a nascent stage . As per GfK Automotive Syndicated Monitor 2020 study, more than half of the surveyed respondents agreed that the key purchase drivers would be the availability of advanced technology, eco-friendly nature and fuel efficiency. The recent announcement by the government is expected to further motivate the customers to adopt electric vehicles. There are various factors which is driving this shift in preferences, however, low operating costs of EVs and soaring fuel prices motivate buyers to consider more fuel-efficient alternatives. The increasing levels of awareness on EV technology among young consumers is likely to accelerate the growth and adoption of EVs across product segments.”
Saurav Kumar, founder and CEO, Euler Motors: “The decision to extend the FAME II scheme will be incremental to push EV adoption in the country. The FAME subsidies have helped EV manufacturers to build efficient and advanced vehicles in the last three years. However, the strict stipulations of the scheme have limited the OEMs to avail its benefits. Given the slow uptick of EVs, the relaxations and revisions in the scheme will ensure OEMs can continue to offer the vehicles at a subsidised cost and cultivate a larger market for electric vehicles.”
Uday Narang, chairman, Omega Seiki Mobility: “Electric vehicles are costlier than traditional vehicles with internal combustion engines (ICE). This revolutionary step by the government to subsidise electric two-, three-, passenger-vehicles and buses will provide the much-needed impetus in faster adoption, thus helping greatly in building up the ecosystem of EV’s in India. We at Omega Seiki Mobility strongly support this initiative. It is a major incentive for make-in-India local manufacturers like us, enabling us to bring more and more EVs of various segments to the country. This will notably make India a significant player in the EV industry.”
Ashutosh Verma, founder, Exalta India: "The increase in two-wheeler EV subsidy is a very good move and will benefit manufacturers like us. The sales of electric two-wheelers has gone up, this move will further increase the adoption of EVs as it would become much more affordable."
Also read: EV sales in India down 19% in FY2021 but demand grows for electric cars