Electric two-wheelers get more discount under FAME-II

The Ministry of Heavy Industries has announced partial amendments to FAME II (Faster Adoption and Manufacturing of Electric Vehicles in India) scheme to support electric vehicle adoption in two, three-wheelers and buses.

When it comes to electric two-wheelers, the increase in demand incentive has been made Rs 15,000 per KWh from Rs 10,000 per KWh with a maximum cap at 40 per cent of the cost of vehicles. The Ather scooters are now cheaper by Rs 14,500. The price of the TVS iQube electric scooter has reduced from Rs 1,21,756 to Rs 1,10,506 (Bangalore price).

Tarun Mehta, CEO and Co-founder, Ather Energy, said: “The revision in the FAME policy, increasing the subsidy by 50 per cent 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 six million+ units by 2025.

“Ather Energy already has plans to expand distribution to 30 cities in the next six months and this increased subsidy will help accelerate consumer demand, immensely. The Government's continued support to drive adoption of EVs, with a keen focus on locally built electric two wheelers, will make India the manufacturing hub of EVs,” he added.

Sudarshan Venu, Joint Managing Director, TVS Motor Company, said: "We welcome the Government’s continued support to EVs. Sustainable mobility solutions are very important for the future and TVS is investing significantly behind this. The improved incentives for electric two wheelers will increase penetration and encourage further indigenous investments in future technology.”

When it comes to three-wheelers, state-owned Energy Efficiency Services (EESL) will come out with an aggregate demand for 300,000 units for multiple user segments. This bulk tendering should lead to economies of scale for OEMs and consequent reduction in the prices of products. The details will be worked out by EESL for implementation, a report by Emkay Global said.

With regard to e-buses: Cities with over four million population (Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune) will be targeted. The details shall be worked out by EESL for demand aggregation and implementation.

The report also said that considering feedback from the industry, the Government has been considering remodeling of the FAME-II scheme to improve acceptance. This was also highlighted by Niti Aayog at Emkay Electric Vehicle Conference.

The FAME II scheme was announced in March 19 with allocation of Rs100 billion, but has not achieved desired results due to its stringent criteria and multiple challenges for OEMs to meet them. Vehicle incentives distributed so far stands at only Rs 2.2bn. For instance, in two-wheelers, a vehicle needs to have a minimum drive range of 80 Km and a maximum speed of over 40 Kmph. In addition, localised content in the vehicle should be elevated. The initial level was at 50 per cent and has been subjected to periodical review.

The report also said that the total cost of ownership (TCO) gap for two-wheelers indicates acquisition and running costs till vehicle is disposed, calculated on a per km basis. As per calculations, TCO for an internal combustion engine scooter (Honda Activa) stands at Rs 5.7/Km, while it is higher for E-2W (Ather 450 Plus) at Rs 7.2/km, assuming a monthly usage of 500 Km. Including the Rs 5,000/ KWh additional incentive, the TCO reduces to Rs 6.5/ Km. In case of monthly usage of 700 Km, the TCO will now be similar.

Currently, electric two-wheeler penetration levels are low at below 1 per cent but could improve to 5-10 per cent over the medium term, on reducing EV prices due to the reduction in battery costs, localisation efforts and scale benefits. According to the report.

It added that large listed OEMs (Hero MotoCorp, Bajaj Auto and TVS Motors) are positioning themselves to benefit from the anticipated EV adoption. However, considering competition from other OEMs (Hero Electric, Ola Electric, Okinawa, Ampere, etc.), market share and margin pressures over the medium term are expected.