EV2W prices shocks prospective owners after govt revises FAME II subsidy

While they are powered by electricity, their new prices are giving shocks to the prospective buyers.

The Central government has revised, from June 1, the FAME II subsidy scheme for two-wheelers with the subsidy element which was as high as 40 per cent of the ex-showroom price of the model, as it found the many two-wheeler makers were not adhering to the component localisation norms and were importing components to roll out the models and take the nation for a ride.

Last year, a probe was launched into the implementation of the Rs 10,000-crore FAME II scheme following allegations of fake localisation claims and incorrect subsidy claims by 12 electric two-wheeler makers.

In other words the majority of the industry was riding on the government subsidies.

The government decided to subsidise the vehicle cost so that development of the local supply chain is faster.

"We are very supportive of the government's decision to reduce FAME subsidy. We believe this will strengthen the industry in the long run. A 40 per cent subsidy is too large and will not encourage innovation and global cost competitiveness," Anirudh Ravi Narayanan, CEO & Co-Founder, Bharat New-Energy.

In a regulatory filing Greaves Cotton Ltd said the Ministry of Heavy Industries on May 25, 2023 has alleged that its subsidiary Greaves Electric Mobility Private Ltd ('GEMPL'), purportedly failed to adhere to Phased Manufacturing Programme Guidelines.

The government has allegedly proposed to de-register GEMPL from FAME India Scheme Phase II.

The Ministry of Heavy Industries has also purportedly directed AGEMPL to deposit all the incentives claimed - approximately Rs 124 crore along with interest - under the said scheme and be subject to submission of necessary representation.

"The Board of Directors of GEMPL will be reviewing and analysing the facts regarding the purported notice and the alleged violations for taking appropriate course of action including engaging with the Government to better understand the alleged violations and for a resolution, in accordance with law," Greaves Cotton said.

Hero Electric recently said that they are awaiting a formal communication from the Ministry of Heavy Industries towards quickly resolving the subsidy deadlock, which could be the first step to help the company recover Rs 500 crore held up with the Department as unpaid subsidy quickly.

"In our recent exchanges with the Department, we have been made aware of the efforts by the Department to find a solution that passes muster by due process at the ministry level and are confident that a practical solution is round the corner," Sohinder Gill, CEO, Hero Electric, said in a statement in April.

Meanwhile, electric two wheeler makers have started hiking their prices some announcing the same and some silently.

Two and three wheeler-maker TVS Motor Company Ltd announced that it has hiked the price of its electric two wheeler iQube between Rs 17,000-Rs 22,000 depending on the variant.

"The Bharat New-Energy is not changing its prices. We are happy with the level of support provided by the government through FAME and PLI, which we are also eligible for. We will continue to support our customers with affordably priced vehicles," Narayanan said.

The drastic price hike will impact retail sales and also the manufacturers' business plan which may even result in consolidation in the industry.

Curiously in January 2023, Narayanan had told IANS that year 2023 will be the year of consolidation for the fragmented Indian electric vehicle (EV) industry that is peppered with small players.

"Yes, 2023 will be the year of consolidation. Consolidation will be driven by regulations which will make it difficult for most of the slow-speed and China white-label players to compete. The startup entry barrier is also significantly increased due to regulations, and I think new startups will have a very tough time entering the market," he had said.

(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)

--IANS

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