‘If we remove EV subsidy, we will derail the adoption’: Mahesh Babu

With the government having a second look at reintroducing the FAME subsidy in its third iteration by April 2024, the industry is of the belief that incentives must continue at least until the nation achieves a double-digit penetration across vehicle categories.

By Mayank Dhingra calendar 25 Nov 2023 Views icon2245 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
‘If we remove EV subsidy, we will derail the adoption’: Mahesh Babu

With electric vehicles (EVs) being the new disruptive technology in the mobility landscape and particularly emerging as a relevant solution in India’s last-mile mobility space that primarily includes electric three-wheelers, and e-LCVs to some extent, the adoption of the technology, however, will remain dependent on consumer acceptance and adaptability, as well as industry and government initiatives. 

According to industry leaders speaking at the Autocar Professional India EV Conclave in Chennai in collaboration with the government of Tamil Nadu, while the automotive industry is taking significant measures such as investing heavily into technology, scale, and capacity, the government too must continue to offer its support in the form of incentive schemes that facilitate consumer adoption.

As per Mahesh Babu, CEO – Global, Switch Mobility, “The government has done substantial work in terms of incentives such as the FAME-I and FAME-II schemes in the past, and now we are talking about the FAME-III scheme. The government is rightly supporting the EV industry, and we would expect them to continue supporting it for at least the next 3-5 years.”

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme which was first rolled out in 2015 with a total budget outlay of Rs 895 crore, later saw the action shifting gears into its second phase, with a total budget outlay now of Rs 10,000 crore, and getting introduced in 2019 for a period of five years. However, with significant lapses found in the process of subsidy allocation, with several EV manufacturing companies reportedly getting incentivised despite flouting the minimum localisation norms, the subsidy was paused mid-way in 2023.

However, while the government is probing the matter, and giving a serious second look to reintroduce the scheme as FAME-III in April 2023, the industry says incentivisation continues to remain a key enabler of the EV transition in India still.

“If we remove EV subsidies, we will derail EV adoption in India. Moreover, my biggest concern therein lies in the risk of India becoming incompetent globally in the bigger scheme of things when we have a massive opportunity for a global play in the EV landscape. Unless we see adoption scale to at least 25 percent, it would be very difficult for the industry to sustain without subsidies,” pointed out Babu.

He further added that globally, countries like the UK offer the ZEBRA (Zero Emission Bus Regional Areas) funding scheme for states to procure electric buses, whereas in the European Union, the Net-Zero funding is a key enabler for the e-mobility shift. “Even in China, subsidies remained prevalent until recently when the country achieved a double-digit penetration across vehicle categories.

“Any new technology adoption, therefore, is based on three different pillars – customer adaptability, industry, and government initiatives,” Babu said in his remarks while adding that consumers are more willing today to buy an EV than 10 years ago, and there should be minimum roadblocks that slow down this shift.

Amitabh Saran, Founder and CEO, Altigreen, concurred with Babu’s remarks and said that it is not easy to remove subsidies until the industry reaches a stage where it can compete with the existing technology. I think there is still a significant gap, and some of these subsidies were introduced because battery packs were priced highly, and therefore, the incentives were based on the battery size.”

“I think the government should extend subsidies till the time lithium-ion cells are available in India, for India, at prices that can be sustained,” Saran added. 

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