Three-Wheeler EV Manufacturers Seek 50% Hike In Fame-II Subsidy

Electric three-wheeler manufacturers have reportedly approached the Ministry of Heavy Industries (MHI) seeking at least a 50% increase in subsidies under the phase-II of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME), which is aimed at promoting adoption of electric vehicles (EVs) in the country.

The manufacturers want an increase in the subsidy to at least INR 15,000 per kWh battery size on the vehicles they sell from the current INR 10,000 per kWh, industry executives told the Economic Times.

It must be noted that under FAME-II, electric two-wheeler manufacturers can currently avail subsidies of INR 15,000 per kWh, which has a cap of 40% on the cost of the vehicles.

A senior government official told the publication that several industry bodies have made representations to the MHI pertaining to this demand. The ministry also arranged a stakeholder consultation on the issue and is currently considering the request.

Meanwhile, an industry executive told the publication that a study was also conducted on the impact of a higher subsidy on the sector and its findings have been submitted to the MHI, which is evaluating the study.

Inc42’s email on the issue to one of the senior officials at the MHI remained unanswered till the time of publishing the article.

With a total outlay of INR 10,000 Cr, the FAME-II scheme is aimed at supporting 5 Lakh electric three-wheelers, 10 Lakh electric two-wheelers, and other EV categories in the form of demand incentives.

As per the government’s latest data, 8.8 Lakh EVs have been supported under the FAME-II scheme till February 15, 2023, which includes 81,172 electric three-wheelers. Meanwhile, 7.1 Lakh two-wheeler EVs were subsidised under the scheme by the end of 2022.

Euler Motors, Altigreen Propulsion Labs, Piaggio Motors, and Mahindra Electric are among the top domestic electric three-wheeler manufacturers.

Commenting on the issue, Amitabh Saran, founder and CEO of Altigreen Propulsion Lab, told Inc42 that the industry is more in need of an extension of the FAME-II scheme than an increase in the subsidy.

“If you engineer the vehicles properly, with the existing subsidy, you will be in a position to compete in the three-wheeler space both in terms of price and performance,” said Saran, adding that people buying three-wheeler commercial vehicles look at operational cost, which is much better for EVs than its other fuel subsidies like CNG or diesel. Hence, well-engineered vehicles would cater to that demand.

Citing the need for extending the scheme, Saran said that the industry would be in more trouble if the FAME-II scheme ends on March 31, 2024, as per its current deadline.

The EV industry was expecting the government to extend the validity of the FAME-II scheme beyond 2024 in the Union Budget 2023-24. While the Centre did not make any such announcement, it increased the allocation for FAME-II to INR 5,172 Cr for FY24 from INR 2,898 Cr in FY23.

A report recently said that the Centre might scrap the scheme post its FY24 deadline.

As per the latest data, the government has utilised a total of about INR 2,835.36 Cr under FAME-II. 

The request to increase the FAME-II subsidy for three-wheeler EVs comes at a time when the government has stopped the subsidy for several electric two-wheeler manufacturers like Okinawa Autotech and Hero Electric for allegedly failing to abide by the localisation norms.

Besides, Ola Electric, Ather Energy, TVS Motors, and Hero MotoCorp are also under the scanner for allegedly keeping their vehicle prices artificially low to claim subsidies.

Currently, 21.7 Lakh EVs have been registered in the country.