Subsidy on just battery not enough to keep cost of EVs low: Naveen Munjal

The FAME II scheme to promote electric vehicles in India is a welcome development but giving subsidy based on only battery power will be counterproductive, Hero Electric Vehicles Managing Director Naveen Munjal said Monday.

While details of the Rs 10,000-crore scheme for the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) II are awaited, he said keeping subsidy based only on battery power may result in increase in the cost of the electric two-wheelers.

What it seems now is that the subsidy under FAME II is "purely linked to the battery" that is put in a vehicle, calculated by multiplying the cost of the battery by a certain amount to be given to a consumer, he told PTI.

"A model of that kind is not necessarily productive," he said.

Certain speed vehicles with city speed of 30-35 kmph range and running up to 30-40 km a day and not beyond, don't require very large batteries, he added.

"So, in this case, it is actually negative for them because the subsidy (they) are getting right now will be reduced by half (under FAME II)," Munjal said.

The Union Cabinet last week approved the FAME II scheme to implemented in three years with effect from April 1, 2019.

Under the scheme, subsidies will be given to three-wheelers and four-wheelers used for public transport or registered for commercial purposes. In the two-wheeler segment, the focus will be on private vehicles.

Through the scheme, the government had planned to support 10 lakh electric two-wheelers, five lakh three-wheelers, 55,000 four-wheelers and 7,000 buses.

Munjal said overall, the announcement of the scheme is a welcome development as the industry has been demanding this and policy clarity for a long time.

However, he said, "How is that (subsidy) calculated needs some refinement. It should not be based on just one matrix. It should be based on power, performance and range," he said.

Munjal further said even high-speed electric two-wheelers doing about 70-90 kmph and running for long distances will also be expensive, which will be not less than Rs 1 lakh and a half despite subsidising it more.

"The issue is the capacity and size. The more you are adding on, the less efficient the vehicle is becoming," he said.

These products will be more expensive than the normal internal combustion engine vehicles.

"At that price point is the shift going to happen as quickly as the government is talking about?," he asked, adding it would raise questions as to whether consumer would accept the high price points.

"As it is, the markets have not started absorbing these products (electric vehicles) completely," Munjal said.