FAME-II revision: Electric two-wheelers to become costlier from June 1
Get ready to pay more for electric two-wheelers (E2Ws) in India starting June 1. The Centre has decided to slash subsidies on such vehicles from Rs. 15,000 per kWh of battery capacity to Rs. 10,000. Also, the total subsidy will be capped at 15% of the vehicle's ex-factory price from next month, compared to the 40% offered right now. Read on for more details.
Subsidies worth crores were earmarked for E2Ws
The Centre, under its FAME-II scheme, allocated subsidies worth Rs. 2,000 crore for E2Ws. However, the sum is almost exhausted. To prevent the entire and abrupt withdrawal of subsidy support, the government allocated an extra Rs. 1,500 crore for electric scooters and bikes. This money was sourced from the unutilized funds meant for electric three- and four-wheelers under the same scheme.
Why has the subsidy been revised?
While the government provided an extra corpus of Rs. 1,500 crore, OEMs were worried that at the current rate of sales, the amount may dry up by August. Hence, the OEMs urged the government to revamp the subsidy structure, thereby prolonging support till around March next year. FAME-II will end on March 31, 2024, and currently, there is no word on its extension.
What will be the impact on prices?
E2Ws from brands like Ather Energy, Hero MotoCorp (VIDA), Ola Electric, Bajaj Auto, and Tork Motors received subsidies of up to Rs. 60,000 till now. This figure is being slashed to Rs. 22,500. As benefits go down, expect prices to go up significantly. The Ola S1 Pro and Ather 450X will see a subsidy drop of around Rs. 37,000 and Rs. 32,500, respectively.
Sales are expected to go down
Companies might pass on the entirety of subsidy reductions to the customers in the form of price hikes. This will increase vehicular prices by anywhere close to Rs. 10,000-35,000. As costs go up, expect sales to slow down in the months to come.
How has the industry reacted?
Responding to the Centre's decision, Ather Energy co-founder Tarun Mehta said, "The industry must stand on its own feet very soon." Meanwhile, Bounce CEO Vivekananda Hallekere described the subsidy reduction as "a great move" and claimed the current FAME-II scheme was incentivizing OEMs "to be inefficient." Greaves Electric Mobility CEO Sanjay Behl said the company will raise prices in line with new FAME-II guidelines.
