[TusharK]

The government of India is likely to reduce the subsidy offered on electric vehicles under the FAME 2 scheme.



According to media reports, the Ministry of Heavy Industries has proposed a new formula to calculate the subsidy for EVs, which could see the existing subsidy of Rs 15,000 per kW reduced to Rs 10,000 per kW. The maximum cap on subsidy is expected to be brought down from 40% to 15% of MRP.

If the new plan goes through, the subsidy for electric 2-wheelers with a battery capacity of 3.5 kWh and a price tag of Rs 1.5 lakh will work out to Rs 22,500. For EVs with a 3 kWh battery and a price tag of Rs 1.3 lakh, the subsidy would be Rs 19,500, while electric 2-wheelers with a 2.2 kWh battery and a price tag of Rs 1 lakh would receive a subsidy of Rs 15,000.

Reports suggest that with the revised subsidy structure, more models will qualify for the FAME 2 subsidy, but each vehicle will receive a smaller amount of subsidy. This is in line with the government's plan to support the sales of over a million EVs under the FAME 2 scheme by next year.

Source: Financial Express

Link to Team-BHP News

[2TR-FE]

Does this mean we are foreseeing an increase of approx 30k INR?

If so, The already expensive ola and ather shall be out of reach for many.

[anjan_c2007]

They have maintained status quo with the subsidy budget but intend that with enhanced production, more 2 wheeler EV's will be entitled to the amount. Also in this news it is revealed that the three wheeler EV subsidies are not fully disbursed (i.e. sales not commensurate with the budgeted amount). Hence the unutilised budgeted amount from subsidy meant for three wheelers will be diverted for two wheelers.

Essentially its a budget appropriation exercise rather than anything significant.

[sri_tesla]

Originally Posted by TusharK

According to media reports, the Ministry of Heavy Industries has proposed a new formula to calculate the subsidy for EVs, which could see the existing subsidy of Rs 15,000 per kW reduced to Rs 10,000 per kW.

Small correction: The battery capacity is measured in kWh, not kW.

Originally Posted by 2TR-FE

Does this mean we are foreseeing an increase of approx 30k INR?

If so, The already expensive ola and ather shall be out of reach for many.

Ola (S1 Pro) and Ather (450X pro pack) are not priced the same. Ather 450X propack ex-showroom price is at least Rs 20K more than the Ola S1 pro. Insurance, road tax (wherever applicable) will also be higher due to higher ex-showroom prices.

I think this subsidy amount reduction is inevitable with the rapid growth of electric 2-wheeler sales in the last 1 year. 2 wheelers alone are getting a subsidy amount of around Rs 400 crores each month and at that rate, the total amount announced under FAME II is depleting much faster than the March 2024 deadline.

After these changes, initially, prices will go up but over time, they will come down with increased competition and higher volumes. In the last few months, major companies like Bajaj and Hero have reduced prices due to higher competition. The same thing will happen in the future as well, especially with companies like Ola and to some extent TVS are going for large production capacities and multiple models. With the overall 2-wheeler market being stagnated and even declining in the last few years and EVs taking market share from petrol vehicles, companies will have no option but to compete on price for their EVs.

[GTO]

The right & sustainable EV business model is the one that can survive without government subsidies. That being said, I don't think India is there yet. Not by a long shot. The mass adoption of EVs - whether 2 wheels or 4 - will require significant government push (including, but not limited to subsidies).

This is not the time to reign in EV subsidies. The sales are still tiny, infrastructure is minimal and there are lakhs of people sitting on the fence. We don't want to push them back to ICE. End of the day, the shrewd Indian customer will always calculate ROI on EVs, with subsidies playing a big part in the calculations.

[fhdowntheline]

I wonder who advises the government on such issues ? There are lot of other "subsidies" that can be taken off, easing the burden for the tax payer. This is one subsidy that is required to encourage people to adopt eco-friendly propulsion. On the other side, they are pushing to phase out ICE engines (diesel ban etc) . Someone is missing the woods for the trees surely.

[johannskaria]

Originally Posted by GTO

The mass adoption of EVs - whether 2 wheels or 4 - will require significant government push (including, but not limited to subsidies).

This is not the time to reign in EV subsidies. The sales are still tiny, infrastructure is minimal and there are lakhs of people sitting on the fence.

Govt just involuntarily made the business case for hybrids in the process, which is a stop-gap arrangement before electric. (at least in 4w space)

Also, we lose out on the manufacturing and exporting hub of the EV push if the policy stays so.

Need a federal policy push to reduce reliance on fossil fuel powered vehicles. (Maybe GST council should stop levying sin tax on BEVs ,components and leasing model)

[MrMcqueen]

I Agree with GTO that this is not the right time to decrease or remove subsidies for EVs .To promote the transition to EVs govt has to provide the subsidies a little while longer. But in the long run EV industry need to sustain without subsidies.

But my take however is. In present scenario Govt is collecting huge amount of Tax revenue from sale of ICE vehicles as well as tax on fuel sales thereon. How does the govt fill the gap if people convert to EVs and make a significant dent in govt tax revenue.

from Govt perspective. On one hand they have to support EVs by giving subsidies on the other hand EVs will cut down on their revenue. that being said how can we say govt is really willing to support above transition if it's going to disturb them.

I guess we have to wait and see how this pans out.

[gnome]

We should keep in mind FAME subsidy is not the only subsidy. Domestic power is also heavily subsidized, while fossil fuel is heavily taxed. While promoting clean fuel, Government policy should also encourage reduced energy use. A "green" replacement for diesel car is not electric car - it's public transportation.
For reference: https://www.iisd.org/publications/in...city-subsidies

[GoBabyGo]

Hi, I had mentioned this earlier also in many threads that only two worries I have with EV adoption is

1. Govt can remove FAME II subsidy (one day this will happen but not expected it to happen before December 2024)

2. Govt may bring new slab (& electricity sub meter or separate meter) for EV charging with significant higer charges eg for EV charging cost may be Rs.15/- per unit or more.

I think EV buying charm will fade down considerably when Govt stop these subsidiaries specially FAME II as well as no RTO charges by some govt.

Even after these subsidies, EV is still very expensive to buy compared to ICE. In future without subsidies and state govt push, EVs will become beyond average Joe budget considering the assumed high cost of battery replacement after say 8 to 10 years, it will be difficult to make up mind to go for EV.

If Govt bring additional slab for EV charging, that will be biggest hurdle in adoption of EVs. As of now I am very much confident that it will happen but when will this happen I don't know but for EV charging at home we will.have to get a separate meter in future I guess.

[pogo0120]

This is a bad move. We still do not have battery manufacturing plants, BMS electronics, semiconductors, or even motors. We are importing almost everything from China and the industry is in nascent stage. They should continue subsidies for another year or so and then remove them altogether in one shot than slowly cutting down, when local battery, electronics, motors all supply chain is running.

If you add Rs 30K per vehicle, then these electric two-wheelers are going to be pretty expensive.

[volkman10]

FAME electric two-wheeler beneficiary tally slashed.

Nearly every second electric two-wheeler sold under the Centre's ambitious ₹10,000-crore electric vehicle promotion scheme was based on false localisation claims, an investigation has found

The ministry of heavy industries has cut the number of FAME-II beneficiary two-wheelers from some 989,000 to just under 564,000.

Link

[amey027]

Originally Posted by sri_tesla

Small correction: The battery capacity is measured in kWh, not kW.


Ola (S1 Pro) and Ather (450X pro pack) are not priced the same. Ather 450X propack ex-showroom price is at least Rs 20K more than the Ola S1 pro. Insurance, road tax (wherever applicable) will also be higher due to higher ex-showroom prices.

I think this subsidy amount reduction is inevitable with the rapid growth of electric 2-wheeler sales in the last 1 year. 2 wheelers alone are getting a subsidy amount of around Rs 400 crores each month and at that rate, the total amount announced under FAME II is depleting much faster than the March 2024 deadline.

After these changes, initially, prices will go up but over time, they will come down with increased competition and higher volumes. In the last few months, major companies like Bajaj and Hero have reduced prices due to higher competition. The same thing will happen in the future as well, especially with companies like Ola and to some extent TVS are going for large production capacities and multiple models. With the overall 2-wheeler market being stagnated and even declining in the last few years and EVs taking market share from petrol vehicles, companies will have no option but to compete on price for their EVs.

Being an industry insider, let me tell you the price reduction that has happened across the OEMs has nothing to do with volume or cost reduction of components. Prices have reduced because OEMs were illegaly charging additional money for the charger which is against DHI norms. DHI forced them to include the cost of charger in the upfront cost of the scooter and hence the price reduction. Every OEM right now is already selling at a loss just in order to avail the FAME subsidy. In order to avail FAME, the ex-factory (manufacturing cost + margin) has to be less than INR 150k and OEMs are basically faking the actual cost of their vehicle so that can show their ex-factory is within 150k and not charging any margin upfront. Ather Ola Vida were all selling their chargers separately for almost 20-25k (actual cost is some 1-2k only) and earning margin through that. Don't forget that stupid performance/sofware package that is being sold for another 20-25k which is almost 100% margin.

As for cost reduction with time, battery prices are at their peak in 5 years and there's little scope they wil go down anytime soon. Raw material inside the motor is imported from China even if the motors are locally made. So nopes, cost of EVs ain't going down and as an extension the price too won't.

[amey027]

As for whether the industry will survive without subsidy depends on how truly valuable customers consider electric 2Ws are. Just take a look at the 4W industry, it has no subsidies and yet electric cars have shown decent acceptance organically. There's no point if an industry is surviving purely based on government support, it just shows there is no organic viability.

Morever, every single OEM has been doing shady stuff just to avail the subsidy so what's the point then? Ather Ola Vida TVS faked their source of charger in addition to selling it as an accessory when it was clearly against regulations. Hero Okinawa Ampere had practically been importing most of their electricals from China. Better is to allow the industry to grow on it's own rather than forcing it by burning tax money.

[snallagatla]

Originally Posted by amey027

Just take a look at the 4W industry, it has no subsidies and yet electric cars have shown decent acceptance organically. There's no point if an industry is surviving purely based on government support, it just shows there is no organic viability.

There might not be a direct subsidy scheme for 4W EVs but most of the states charge little to nothing on Road Tax. Also, there are other benefits like less interest rates on vehicle loan, tax benefits and etc.