The center’s plan to reduce subsidies for EVs under the FAME II scheme may not bode well for India’s growing EV market. The Society of Manufacturers of Electric Vehicles (SMEV), the body of electric carmakers in the country, believes the move will negatively impact buyer sentiment and slow down the adoption of EVs in India. The EV maker group reacted days after all stakeholders met to discuss the future of the FAME II incentive program.
The Ministry of Heavy Industry plans to cap the factory price of electric two-wheelers between 40% and 15%. Earlier this week, 24 stakeholders met to find ways to ensure the FAME II scheme continues until it expires next March.According to a government official, “We have decided to transfer unused subsidies to ¥Rs 1,500 crore from 3-wheelers and 4-wheelers to 2-wheelers, but it has been found that at the current rate of payment (ex-factory price is capped at 40 pieces), the scheme will end in two months. “
Sohinder Gill, director general of SMEV, said the move would curb the significant growth of the electric two-wheeler market. According to him, the EV market is still quite price-sensitive. He added that the move would also widen the price gap between internal combustion engine two-wheelers and electric vehicles. “We think a significant reduction in subsidies will hurt the market and the adoption of E2W (electric two-wheelers) could drop significantly,” Gill said.
Gill also added that the move could lead to lower sales. “A gradual transition through continued subsidies is ideal to secure market growth and reach the international benchmark of 20% electric vehicle market share. However, a sudden and significant reduction in subsidies could lead to a sharp decline in sales that could affect the industry for a considerable period of time. ,”He said.
Despite plans to reduce subsidies, the center still plans to increase spending on electric two-wheelers. However, much of this will be used to support electric vehicle infrastructure across the country.
First published date: May 19, 2023 at 09:11 AM CST
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