SUMMARY
The development comes after a whistleblower claimed that the companies have been artificially reducing EV prices to stay eligible for FAME-II subsidies
According to the FAME scheme, electric two-wheeler OEMs cannot claim subsidies on vehicles with an ex-factory price of over INR 1.50 Lakh
These companies have reportedly been billing chargers and software separately from the vehicle, driving the actual price down
The representatives of Ola Electric, Ather Energy, TVS Motors and Hero MotoCorp have reportedly met with government officials to respond to the recent whistleblower allegations around the mispricing of vehicles under FAME-II norms.
According to an ET report, these manufacturers had responded to an email communication being sent by the testing agency Automotive Research Association of India (ARAI).
The testing agency had sought clarification on the allegations that these original equipment manufacturers (OEMs) were billing their chargers and add-on software upgrades separately to avail of the subsidies.
Last month, media reports stated that the EV makers were under government scrutiny after a whistleblower accused them of billing software and charger separately to artificially keep the vehicle price under the limit mandated under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME-II) scheme.
According to the FAME scheme, electric two-wheeler OEMs cannot claim subsidies on vehicles with an ex-factory price of over INR 1.50 Lakh. Currently, the scheme provides subsidies of INR 15,000 per kWh battery size for two-wheelers up to 40% of the price.
Adding chargers and software to the costs of a vehicle would bring up the overall price of many EV models above the INR 1.5 Lakh limit, though the government is said to be in talks to increase the limit to INR 1.8 Lakh.
EV makers are known to offer software upgrades as ‘virtual accessories’ to allow for a better user experience than the base model. Oftentimes, a customer has to pay a premium to upgrade their EV to the said software package.
On the chargers’ side, the EV makers have argued that the charger is not an important part of a vehicle. As such, they offer chargers as optional accessories since a customer would either be owning another charger in case they have another EV, or they can use the public charging infrastructure EV makers have built.
For instance, both Ather and Hero MotoCorp said they have set up free charging stations for customers, with Ather claiming to have 1,100 Ather Grids and a 100-member team running them and Hero MotoCorp claiming to have set up 300 charging stations in 50 cities.
The aforementioned report cited a government official stating that these companies should be legally safe from a mispricing point of view as billing chargers and software separately from the vehicle does not flout FAME-II norms, at least on paper.
FAME-II Troubles Mount
The government’s subsidy scheme has had its fair share of issues over the past few months. While it has facilitated EV production and adoption in India, many companies have allegedly flouted some norms to receive subsidies.
At the moment, the Centre is investigating companies including Hero Electric, Okinawa and Ampere, among others, after a whistleblower claimed that these companies do not meet the required localisation and domestic value addition norms prescribed under the FAME-II scheme.
The continued issues have seen reports emerge stating that the government might not extend the FAME-II scheme beyond FY24. To address the misuse of the scheme, the Centre has also reportedly pulled in IFCI Ltd, a public sector non-banking finance company (NBFC), and global consultancy firm EY to streamline the scheme.
