Electric two-wheelers in India have witnessed a price increase as the government revised the subsidy under the FAME India (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) Scheme. The subsidy has been reduced from Rs 15,000 per kilowatt per hour (kWh) to Rs 10,000/kWh, and the maximum cap for incentives has been lowered from 40 per cent to 15 per cent of the two-wheeler EV's ex-factory price. This translates to a 37.5 per cent reduction and will result in higher vehicle prices.
The Ministry of Heavy Industries (MHI) on May 21 had announced that these amendments will be put in place on June 1. The FAME II Scheme, with an approved budget of Rs 10,000 crore, commenced on April 1, 2019, and received a two-year extension in June 2021.
In June 2021, in an effort to boost demand for electric two-wheelers, the MHI increased the demand incentive from Rs 10,000/kWh to Rs 15,000/kWh, with the maximum cap raised from 20 per cent to 40 per cent of the EV's cost. The latest revision by the government rolls back the subsidy to the levels of two years ago and further reduces the maximum cap by 5 per cent on the cost of EVs.
The reduction in FAME subsidies comes at a time when the domestic electric two-wheeler market achieved over 700,000 unit sales in FY2023. However, the monthly sales are witnessing a decline. Retail sales dropped to 66,810 scooters in April 2023 compared to a monthly average of 75,000 units in the previous quarter.
The new development will increase the prices of electric two-wheeler by up to Rs 25,000 to Rs 35,000, for premium and mainstream models. Brands like Ola Electric, Ather and Hero MotoCorp will be adversely impacted by the withdrawal of FAME subsidy.