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EV buyers to get smaller batteries, less features as Centre cuts subsidy

The Centre recently announced a reduction in FAME II subsidy on electric two-wheelers to Rs 10,000 per kWh from Rs 15,000 per kWh and the maximum subsidy cap of 40 per cent to 15 per cent

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BS Web Team New Delhi

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After the Centre's move to cut FAME-II subsidy on electric two-wheelers, the electric vehicles (EV) industry is looking to make changes in products and prices to stay competitive, reported Economic Times (ET).

The Centre recently announced a reduction in FAME II subsidy on electric two-wheelers to Rs 10,000 per kWh from Rs 15,000 per kWh and the maximum subsidy cap of 40 per cent to 15 per cent.

This change in subsidy is likely to impact the input cost for producers, raising prices for consumers. Keeping this in mind the leading players are planning to bring in lower-spec variants with smaller batteries and changed features to adjust prices and cover costs.

As the uncertainty over the continuation of the FAME scheme prevails, the experts from the EV industry believe that continued support from Centre through such a scheme will increase EV penetration across the country. Currently, the presence of electric 2 and 3-wheelers stands at just 5 per cent. Policy support from the Centre can help increase the penetration to over 60 per cent.

The sales of electric 2-wheeler has been falling since April after record monthly sales of 85,793 units in March 2023.

According to Vahan portal the monthly sales for electric 2-wheeler in May stands at 39,000 units and 3-wheelers at 23,527 units.

Venkat Rajaraman, CEO of lithium-ion battery pack maker, Cygni Energy, told ET that subsidies should continue as they are important to compete with ICE vehicles.

Rajaram explained that when the subsidy was provided in June 2021, many EV makers increased the battery size to 2.5 to 3 kW. The cut in subsidy may lead to smaller size batteries ranging from 1.5 to 2 kW he said.

Sulajja Firodia Motwani, chief executive of Kinetic Green told the ET that the industry needs FAME II for at least 3 more years to ensure accelerated EV penetration in the country.

The report also added that there are several industry experts who feel that there is no need for more subsidies on EVs, as already more than a million EVs have already been subsidised.

The Centre started implementing the FAME II subsidy in October 2019. The Covid-19 pandemic and the subsequent lockdowns took a significant toll on the EV industry.


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First Published: May 21 2023 | 8:19 AM IST

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