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FAME 2 subsidy won't impact Indian EV industry's growth momentum, says Ola CFO

The government of India has slashed the subsidy for electric two-wheelers in an amendment to the FAME 2 scheme. Owing to this move, the price of the electric two-wheelers that are eligible for the FAME 2 subsidy will go up from June 1, as several electric two-wheeler manufacturers have already hinted. However, this subsidy reduction won't impact the growth momentum of the Indian electric two-wheeler industry, believes Ola Electric's Chief Financial Officer (CFO) GR Arun Kumar.

By: Mainak Das
Updated on: 28 May 2023, 12:03 PM
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FAME 2 subsidy has been reduced significantly by the government of India, which will result in a price hike for eligible electric two-wheelers from June 1.

In an interaction with HT Auto, Ola Electric's CFO said that the FAME (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India) scheme has been an enabler of growth for the Indian electric vehicle industry. Reduction of the subsidy under this scheme will not impact the growth momentum of the EV industry in the country. In his opinion, the FAME scheme has already served its purpose. Hence, it doesn't matter whether the subsidy is being offered under the scheme or not, how much subsidy is being offered etc. However, the Ola CEO didn't reveal what would be the pricing dynamics from the EV company once the revised subsidy structure is implemented next month, which benefits the company's consumers.

Also Read : FAME 2 subsidy reduction to hit EV sales in India, says manufacturers' body

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Ather Energy, a major player in the Indian electric two-wheeler market, has already revealed that its 450X electric scooter price will be higher from June 1. Despite revealing the price hike, Tarun Mehta, the co-founder and CEO of Ather Energy, has said that the EV industry must stand on its own feet very soon. He clearly hinted that a subsidy-based business ecosystem could not sustain for long. Okinawa, another key player in the electric scooter market of the country, has revealed the price of electric two-wheelers will increase to the extent of reduction of the subsidy value. The EV company also said that there would be a short-term impact on sales, but in the long term, it will help the industry to be self-reliant.

The Society of Manufacturers of Electric Vehicles (SMEV) thinks the decision will slow down EV adoption in the country further. Sohinder Gill, Director General at SMEV, said that this sudden subsidy cut might lead to a major decline in EV sales, impacting the entire industry for a considerable period of time. He further said that the EV two-wheeler segment is still highly price sensitive, and the increasing gap in prices of ICE models and EV models will eventually hit sales.

Indian consumers have been known for being highly price sensitive. Electric two-wheelers, especially the high-speed models that are covered under the FAME 2 scheme, are pricier compared to their ICE equivalent models. However, the FAME 2 subsidy, along with subsidies offered by some state government EV policies, helped in mitigating the high price impact on consumers, which undoubtedly helped the growth of electric two-wheelers in India.

While low-speed scooters still hold the lion's share in the Indian electric two-wheeler market, the high-speed models are gradually gaining more footprints. This has helped the electric two-wheeler sales in India to rise over two and half fold to 846,976 units in the last financial year, as revealed by SMEV. Now, with the FAME 2 subsidy slashed substantially, it is to be seen how the industry and the consumers brace for the impact.

First Published Date: 28 May 2023, 12:03 PM IST
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