FAME 2 subsidy for electric two-wheelers slashed, EVs to be costlier from June 1

The Indian government has slashed the subsidies for electric two-wheelers, which will be applicable from 1st June 2023 onwards. This will result in a significant price hike for electric two-wheelers enjoying the subsidy benefit under the FAME (Faster Adoption of Manufacturing of Electric Vehicles in India) 2 scheme. Previously, the Ministry of Heavy Industries proposed a reduction in subsidies for the electric two-wheelers, and now, it has been passed, confirming the incentive cut.

The FAME 2 subsidy cut move will impact the pricing of popular models like Ather 450X, Ola S1 Pro and TVS iQube, among other electric scooters that have been receiving the benefits so far. Under the amended FAME 2 scheme, subsidies for electric two-wheelers have been reduced from ₹15,000/kWh to ₹10,000/kWh. Also, the maximum subsidy under the amended FAME 2 scheme has been capped at 15 per cent of the ex-factory pricing of the eligible electric two-wheelers, substantially down from the 40 per cent offered till now.

For example, if an electric two-wheeler with ex-showroom pricing of ₹100,000 was receiving a ₹40,000 subsidy under the FAME 2 scheme so far, it will now receive only a ₹15,000 subsidy from now on. This means the buyer of the particular electric two-wheeler will have to pay ₹25,000 extra from his or her own pocket.

In the last financial year, FY23, more than 779,000 high-speed electric two-wheelers were sold across India, which received the FAME 2 subsidy benefit. The latest move by the Ministry of Heavy Industries to reduce the subsidy under the FAME 2 scheme will substantially drive up the prices of electric two-wheelers. Expect the pricing of the popular electric scooters to increase by up to ₹30,000 due to this move. It will be interesting to see how the EV manufacturing industry in India makes the course correction and how the demand dynamics unfold in the coming months.

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