Everything about new FAME II subsidy: Why e-two-wheelers are becoming cheaper

In a bid to promote green mobility and make the electric two-wheelers more affordable, the Indian government recently announced the revised FAME II subsidy. This move has been aimed at promoting faster adoption and manufacturing of electric vehicles in India.

The government had previously introduced the FAME II scheme in 2019. Back then, the scheme laid down the eligibility criteria including a minimum range of 80 km and a minimum top speed of 40 kmph for an electric two-wheeler to qualify for this subsidy.

The newly amended scheme extends the subsidy amount for the battery-powered two-wheelers that meet the previous eligibility criteria. In 2019, the government announced a subsidy amount of ₹10,000 per kWh but now, this has been revised under the new FAME II scheme which offers 50% more subsidy at ₹15,000 per kWh.

This move has been well received by EV makers in India as it aims to bring down the overall cost of electric bikes and scooters, thereby boosting sales and helping in quicker EV adoption. In fact, soon after the announcement, a number of two-wheeler makers immediately passed on the benefits to customers.

Ather Energy slashed the prices of its models by as much as ₹14,500, as a result of this amendment. "The revision in the FAME policy, increasing the subsidy by 50% per KWh is a phenomenal move. Sales of electric two-wheelers have grown despite the pandemic and with this additional subsidy, we expect electric two-wheeler sales to disrupt the market, and clock 6 million+ units by 2025," said Tarun Mehta, CEO and Co-founder of Ather Energy.

Apart from Ather Energy, a range of other electric two-wheeler manufacturers such as Okinawa and TVS, have also announced a price decrement for their battery-powered models in India.

Hero Electric also welcomed the move with MD Naveen Munjal predicting it to be one of the most significant moves of the decade. "As we continue to expand our reach, set up charging points and reskill mechanics to create an ecosystem, a conducive policy as this will help in the growth of EVs and transform the sector into a cleaner and greener mode of transportation," he said.

The new FAME II subsidy is likely to introduce price neutrality between conventional ICE-powered vehicles and electric-powered vehicles. Shamsher Dewan, ICRA Vice-President and Group Head, said that electric two-wheeler's initial cost of ownership will incrementally reduce by a minimum 10-12%. It will thus result in a lower payback period. "The payback period was estimated to be four years (in terms of the total cost of ownership), which now stands reduced to three years," he also added.

Two-wheelers are the largest beneficiary in the ₹10,000 crore subsidy earmarked under the revised FAME-II scheme.