FAME 2 subsidy won’t affect India’s EV sector growth momentum, says Ola CFO


The Government of India has cut subsidies for electric two-wheelers in an amendment to the FAME 2 scheme. As a result of the move, the prices of electric two-wheelers eligible for FAME 2 subsidies will increase from June 1, several electric two-wheeler manufacturers have hinted. However, GR Arun Kumar, Chief Financial Officer (CFO) of Ola Electric, believes that this reduction in subsidies will not affect the growth momentum of the electric two-wheeler industry in India.

go through:

Updated on:
May 28, 2023 at 12:03 am

The Indian government has slashed the FAME 2 subsidy, which will result in an increase in the price of eligible electric two-wheelers from June 1.

In an interaction with HT Auto, Ola Electric’s CFO said that the FAME (Facilitated Adoption and Manufacturing of Electric and Hybrid Vehicles in India) program has been a growth driver for the EV industry in India. The reduction of subsidies under the scheme will not affect the growth momentum of the country’s EV industry. In his view, the FAME program has served its purpose. So it doesn’t matter if the program subsidizes, how much, etc. However, the Ola CEO did not reveal what the pricing dynamics of the EV company will be structured once the revised subsidy will be implemented next month, which will benefit the company’s consumers.

Also read: Reduced FAME 2 subsidies to hit EV sales in India, says manufacturers group

Ather Energy, a major player in the electric two-wheeler market in India, has revealed that the price of its 450X electric scooter will increase from June 1. Despite revealing the price hike, Tarun Mehta, co-founder and CEO of Ather Energy, has said that the EV industry must soon stand on its own feet. He clearly implied that a subsidy-based business ecology cannot be maintained for a long time. Okinawa, another major player in the country’s e-scooter market, revealed that the price of electric two-wheelers will rise to the point where the subsidy amount will be reduced. EV companies also say there will be an impact on sales in the short term, but in the long run it will help the industry stand on its own feet.

The Society of Manufacturers of Electric Vehicles (SMEV) believes the decision will further slow the adoption of EVs in the country. SMEV director-general Sohinder Gill said such a sudden subsidy cut could lead to a sharp drop in EV sales, affecting the industry for quite some time. He further said that the EV two-wheeler segment is still highly price-sensitive, and the increasing price gap between ICE models and EV models will eventually affect sales.

Indian consumers are known to be highly price sensitive. Electric two-wheelers, especially the high-speed models covered by the FAME 2 program, are more expensive than their ICE equivalents. However, FAME 2 subsidies as well as subsidies offered by some state government electric vehicle policies have helped to lessen the impact of high prices on consumers, which will undoubtedly contribute to the growth of electric two-wheelers in India.

While low-speed scooters still hold the largest share of the electric two-wheeler market in India, high-speed models are gradually gaining more footprint. According to SMEV, this helped sales of electric two-wheelers in India more than triple and a half to 846,976 units in the last financial year. Now, with FAME 2 subsidies slashed, it remains to be seen how the industry and consumers will respond to the impact.

First published date: May 28, 2023 at 12:03pm CST


Leave a Comment