FAME 2 impact: Electric two-wheeler startups to absorb majority of subsidy shock to maintain market position

Electric two-wheeler startups are deciding to absorb a majority of the subsidy shock in order to ensure that the penetration is not compromised. For instance, unlike other electric vehicle OEMs who have fully passed on the FAME 2 subsidy price increase, Ola Electric has decided to absorb close to Rs 17,000 for the long haul, based on various cost improvement measures and renewed efficiencies in supply chain management, company officials told Autocar Professional.

Since June, due to the central government's new decreased subsidy scheme going into effect, the price of electric two-wheelers has increased from Rs 10,000 to Rs 40,000.

Ola, which saw record sales of over 35,000 units, is taking this decision in an endeavour to maintain its lead. The maker of the S1 Pro, Bengaluru-based Ola Electric, has said that it has no plans to raise the prices further after announcing a flat 15,000 hike and absorbing Rs 16,868 in subsidy loss for the time being. This is even though EV makers have passed on the full impact of the FAME 2 subsidy hike or chosen a staggered price hike in some cases.

Ankush Aggarwal, Chief Business Officer, Ola Electric acknowledged this move in an interview with Autocar Professional, and said, "Keeping our consumer's interest in mind and looking to put an end to the ICE Age, we have decided not to go for any further price hikes for the time being."

According to company representatives, the long-term goal of the EV manufacturer is to remain profitable without government assistance and increase its overall market share from 30 percent to 50 percent by aggressively expanding into Tier 2 and Tier 3 markets, opening up a total of 1,000 company-owned-company-operated (COCO) outlets, and launching its first electric motorcycle by mid 2023.

Based on its internal cost-savings program and end-to-end supply chain strengths to absorb the increased cost outlay, Ola Electric stated that its prices for its models, which range from Rs 1,39,999 for the S1 Pro to Rs 1,29,999 for the S1 (3 KWh) and Rs 1,09,999 for the S1 Air (3 KWh), will remain constant for at least the upcoming few months.  

Aggarwal claimed that the Ola S1 Air (3 KWh), which costs Rs 1,09,999 and is one of the least expensive scooters in the 3 KW category, will become the company's most effective strategy in providing an ICE-EV equivalent in Tier 2 and Tier 3 regions. Ola Electric plans to start deliveries of the S1 Air from July onwards.

The Honda Activa 6G X Smart, a rival of the Ola Electric ICE equivalent, costs Rs 82,467. Given the reduced TCO (total cost of ownership) of the electric scooter, Subhabrata Sengupta, Executive Director of global management consulting firm Avalon Consulting, says, "The reduced total cost of ownership and simple access to financing will tilt the tide in favour of EVs over the long run.”

When asked if the numbers would see a downward revision from June and July onwards, as consumers feel the pinch of the price hike, Sengupta said, "Obviously, subsidy reduction will have an impact over 1-2 years, but the long-term story is unaffected. There was always going to be the pain of subsidy withdrawal sometime."

Ather opts for staggered approach 

Ola Electric's leading competitor, Ather Energy, went in for the least reduction of Rs 8,000 for its entry-level Ather 450X offering, but company officials said that the company has gone for a staggered approach, which means that it will revise its prices in the short to medium term.

"The FAME 2 modification led to a subsidy decrease of almost 32,000 Indian rupees. To speed up the adoption of EVs in the nation, Ather is absorbing a significant portion of this pricing effect for its customers, according to Ravneet S. Phokela, Chief Business Officer of Ather Energy.

EV makers that nearly  passed full hikes to their customers

Unlike Ola Electric and Ather, the manufacturer of the Chetak electric scooter, Bajaj Auto said that the firm has raised the costs of its product by Rs 22,000, which is equal to the subsidy loss.

To lessen the financial strain following the change to the FAME II subsidy, TVS Motor business director and CEO K N Radhakrishnan stated that the business will offer "a loyalty benefits program for the customers of iQube who have made bookings until May 20, 2023." The rates for TVS Motors' I-Qube were raised from Rs 17,000 to Rs 22,000 as a result. Customers who pre-booked with TVS Motor before May 20, 2023, will also receive an extra loyalty reward.

Greaves Cotton-backed Greaves Electric Mobility too has gone for a Rs 20,000 to Rs 40,000 price increase for their Ampere Zeal EX, Magnus EX, and Primus scooters, which will now cost between Rs 20,900 and Rs 39,100 more.

The pricing of the Greaves Primus series, which was previously listed at Rs 1,09,900, has been raised to Rs 1,49,000, increasing the cost of the EV by Rs 39,100.

Magnus EX's new price is 1,04,900, up by Rs 21,000 from its previous pricing of Rs 83,900, while Ampere Zeal Ex's introductory price of Rs 75,000 will now cost Rs 95,900, representing a price increase of Rs 20,900.