EV industry sells 1 million units in FY23

The electric vehicle industry reported sales of 1152021 electric vehicles in FY23, as per the Society of Manufacturers of Electric Vehicles (SMEV). This includes E-Buses, E-Cars, E-Three-wheelers, and E-two-wheelers, a press release stated. 

As per the data sourced from manufacturers, 120,000 low-speed (LS) E-scooters, 285,443 (LS) E rickshaws, and around 50,000 (LS) E-cycles were also sold in FY23. 

In the electric two-wheeler segment, the industry sold 7,26,976 high-speed E2W (speed>25km/hr) in FY23. However, the E2W adoption fell month on month over the targets ending with an annual shortfall of more than 25 percent over the minimum target set by Niti Aayog and various research organisations, the release noted. 

While the market has been making good progress in recent years towards a sustainable and greener future, industry experts and stakeholders are concerned that the momentum in E2W adoption fell after the Indian festive season.

Ironically it was not the consumer demand but the sudden withholding of more than the Rs 1200 crore subsidy already passed on by the majority of OEMs (original equipment manufacturers) to the customers on the pretext of delay in the localisation. Another Rs 400 crore of the OEMs operating in the premium end also got stuck due to the allegation of under invoicing to bypass the FAME norms leading to crippling of their business operations due to extreme shortage of working capital. Today 16 companies that represent more than 95 percent of the industry,  are waiting for some resolution for the chaos and the fiasco of the FAME PMP are cleared to enable them to plan their businesses in the year FY24. 

Sohinder Gill, Director General, SMEV, said, "Over the years, the E2W industry has been catching pace and working relentlessly towards achieving the country’s mission of largely converting to electric." 

He added that while all the earlier schemes since 2015 had a negligible effect on EV adoption, the revised FAME2 had a dramatic effect on E2W adoption, as it decreased their prices by around 35 percent. This started attracting the component supply chain that had earlier shunned anything to do with E2WS because of extremely low volumes and it is only in the late 2021, suppliers started queuing up to OEMS to show their eagerness of developing EV component. It took most of these suppliers 12 to 18 months, the usual time that it takes to localise and now most of them have started setting up sufficient capacities.

With only 5 percent adoption in FY23 and the short-term goal of 30 percent and the  EV mission of 80 percent adoption by 2030 looks difficult. What can perhaps can put the industry back on track is an extension of the PMP eligibility criteria by two years and strictly enforcing it from April 23.

Supply Chain

The absence of enough local manufacturing capacity for vital components like batteries and motors is one of the major problems in the supply chain. Due to supply chain interruptions during COVID, the industry suffered greatly to find high-quality components. To develop a sustainable and effective supply chain, numerous ecosystem stakeholders have played a significant role. The sector has reduced its dependency on imports and is now self-sufficient, with the majority of the components being produced domestically, SMEV stated. 

FAME Scheme

The government’s decision on the continuation of FAME is a critical piece that will decide the fate of the entire industry. In order to encourage the development of the EV ecosystem and make it self-sustaining, it is crucial to have an extension of the FAME scheme for at least 3-4 years.  SMEV recommends phased tapering-off of subsidies after reaching a certain threshold. For example, the government can limit the subsidy after converting 25% of two-wheelers into electric ones.

Subsidy Mechanism

Currently, the manufacturers pass the subsidy to the customer and claim it from the government, post the sale. The current method lacks transparency, which may lead to OEMs manipulating sales to claim the subsidy fraudulently. SMEV recommends the introduction of a direct subsidy mechanism that allows incentives to be directly paid to the customer by the government, thus avoiding any discrepancy.

PLI scheme

SMEV welcomes the amendment made to the PLI scheme for Automobiles and components, which previously restricted MSMEs and startups from participating in the scheme. It will create a level playing field for pure-play EV companies and allow them to compete with other players.