Will hurt the market: EV makers' body reacts to Centre's plan on subsidy cut
- The Centre is likely to reduce subsidy on electric two-wheelers under the FAME II scheme in coming days which will impact the prices of the vehicles.
The Centre's plan to reduce subsidy on electric vehicles under the FAME II scheme may not augur well for the growing EV market in India. The Society Of Manufacturers Of Electric Vehicles (SMEV), which is the body for EV manufacturers in the country, thinks the move will have a negative impact on buyer's sentiments and slow down EV adoption across India. The EV makers' body reacted days after all stakeholders met to discuss the future of FAME II incentive scheme.
The Ministry for Heavy Industries plans to cap ex-showroom price of electric two-wheelers from 40 per cent to 15 per cent. 24 stakeholders met earlier this week to find ways to ensure the FAME II scheme continues till it expires in March next year. According to government officials, “It was decided that we will transfer the unutilised subsidies to the tune of ₹1,500 crore from 3 Wheelers and 4 Wheelers to 2 Wheelers but it was found that at the current rate of disbursal (40 pc cap on ex-factory price), the scheme will end in two months."
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Sohinder Gill, Director General at SMEV, said the move will curtail phenomenal growth witnessed by the electric two-wheeler segment. According to him, the EV market is still quite price sensitive. He added, the move will also increase price gap between ICE two-wheelers and EVs "We feel this sharp reduction in the subsidy is going to hurt the market and the adoption of E2Ws (electric two-wheelers) may go down substantially," Gill said.
Gill also added that the move could lead to a drop in sales. "A gradual transition with sustained subsidies would have been ideal to ensure market growth and reach the international benchmark of 20 per cent EV market share. However, the sudden massive reduction of subsidy will likely lead to a major decline in sales, impacting the entire industry for a considerable period of time," he said.
Despite plans to reduce subsidy, the Centre plans to increase outlay for electric two-wheelers. However, most of it will be used to bolster the EV infrastructure around the country.
