FAME II subsidy reduction to hit EV sales in India, says manufacturers' body

Electric two-wheelers in India will become costlier after the Centre slashed the subsidy rate under FAME II subsidy scheme to just 15 per cent from Ju
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Ather 450X (left) and Ola S1 Pro may be expensive but also offer a whole lot of tech-based features. Okinawa Praise Pro prioritizes ride quality and traits over all else.

Looking to buy and Ola Electric or Ather Energy electric scooters. One will need to pay a lot more to ride home in a brand new electric two-wheeler from June. The Centre has approved the proposal to reduce subsidy on electric two-wheelers from 40 per cent to just 15 per cent from next month. The move has triggered reactions from the manufacturers' body which said it will sharply hit EV sales in India.

The Society of Manufacturers of Electric Vehicles (SMEV) also thinks the decision will slow down EV adoption in the country further. Sohinder Gill, Director General at SMEV, said, "The sudden reduction of subsidy may lead to a major decline in EV adoption, impacting the entire industry for a considerable period of time." He added that the EV two-wheeler segment is still quite price sensitive and the increasing gap in prices of ICE models and EV models will eventually hit sales. He also suggested a phase-wise reduction in subsidy on electric two-wheelers to ensure the EV segment continues growing.

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On Monday, the Centre approved proposal by the Ministry of Heavy Industries Ministry to reduce subsidy on electric two-wheelers bought on or after June 1. The notification issued by the ministry says a customer will only get 15 per cent of the overall cost of the electric two-wheeler back as subsidy. For instance, a customer buying and electric two-wheeler with ex-showroom pricing of 100,000 was receiving a 40,000 subsidy under the FAME II scheme so far. From June 1, the amount will go down to 15,000, with an increase in price of almost 25 per cent.

While most of the major electric two-wheeler manufacturers have not issued any official statement on the decision yet, some of the startup players have welcomed it. Siddharth Kabra, Co-Founder and CEO of VoltUp, said, "With the reduction of subsidy to 15 per cent, it is clear that the electric vehicle ecosystem in India is growing rapidly and there is demand. While the immediate impact of subsidy reduction will be a rise in price and lower sales, the government in a way is allowing the industry to become independent." Nikhil Bhatia, Co-Founder and CEO of HOP Electric Mobility, said, "Phasing out the subsidies is a forward looking move, and it's time now that the dependence on subsidies is done-away-with gradually," he said.

The Centre's decision is likely to hit customers of Ola Electric, Ather Energy and other established electric scooter brands. Most of their EVs are priced around one lakh or more. Ola Electric is currently the leader in the segment followed by others like Ampere, Okinawa, Ather and others.

First Published Date: 23 May 2023, 15:53 PM IST
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