Ebikes deliveries stalled due to lack of supply in April
FAME II recertification rules held up availability, says industry association SMEV
EV industry body says stagnation could continue for months
Electric vehicle industry in India is definitely taking small steps towards making India’s EV plans a reality. While concerns related to infrastructure and technology continue to prevail in the industry, government and private players are doing their bit to ensure India achieves its emobility dream by the year 2030.
One of the cornerstones of this plan is the incentive-driven policy called FAME, which brought incentives to manufacturers and boosted sales. The Indian electric vehicle industry recorded sale of 7.59 Lakh units in India in FY2019 as opposed to 56K (excluding three vehicles) in FY2018. This included the sale of 1.2 Lakh two-wheelers, 6.3 Lakh three-wheelers and 3,600 passenger vehicles. This is massive growth in a span of a year for a new category and the need of the hour from an industry point-of-view was to allow the momentum to continue. However, FAME II changed all that.
The Indian government began implementing phase 2 of the plan or FAME II in April this year. In that month, India recorded near-zero sales of electric two-wheelers. The reason behind this is the lower availability of vehicles in the market due to the FAME II recertification rules of all existing EVs, according to industry body Society of Manufacturers of Electric Vehicles (SMEV).
The recertification has held up production lines as changes can be expected based on the recertification process. Secondly, EV companies, which need to collect the FAME II incentives, had to follow the government recertification process, or suffer at the hands of competition which does get those FAME II incentives.
For the uninitiated, all original equipment manufacturers (OEMs) are required to get their electric two-wheeler models certified by recognised testing agencies such as Automotive Research Association of India’s (ARAI), under Rule 126 of Central Motor Vehicle Rules (CMVR), 1989. Post recertification process, the vehicles will be able to claim for incentives under FAME II.
To be noted, only sales of electric two-wheelers under Faster Adoption and Manufacturing of Electric Vehicles in India or FAME II (Lithium-ion batteries) have dipped. The recertification condition is not applicable for some two-wheelers such as those powered by lead-acid batteries, or bikes having a top speed of less than 40 kmph. But the more modern ebikes with lithium-ion batteries and a top speed of over 40 kmph have to be certified under FAME II.
“FAME II certification is taking longer for most manufacturers since it includes re-qualification which is time-consuming” – Ravneet Phokela, chief business officer, Ather Energy
FAME II Recertification Delay Could Stretch For Months
In response to Inc42’s query on whether FAME II recertification delay would cause significant damage to the industry or not, Sohinder Gill, director general, SMEV, said that due to the time-consuming procedure, it is difficult for the electric vehicle companies to put their vehicles for sale causing low supply.
Gill added that the slow start to the financial year could last a few more months. New models will likely have higher prices than before due to reduced incentives under FAME II, as well as the sales lacunae of the previous months. He added that the time required for vehicle recertification depends on things such as vehicle complexity and it involves long wait-times considering the number of EV players in the market.
According to data available on the FAME website, a total of 29 companies manufacturing electric vehicles are eligible to apply for FAME incentives. About 18 out of these manufacture electric two-wheelers which can avail the incentives under FAME II schemes.
E-Bike Makers Suffer Due to FAME II Delay
Given that it is a crowded market, only three to four e-bike models were certified in April. According to reports, two models of Okinawa Scooters received Automotive Research Association of India’s (ARAI) certification under FAME II scheme.
Bengaluru-based electric two-wheeler maker Ather Energy also told Inc42 that sales of its bikes stalled in April due to the recertification. While the company was taking orders for the vehicles, deliveries had been halted since the bikes are yet to be recertified.
“FAME 2 certification is taking longer for most manufacturers since it includes re-qualification which is time-consuming. Manufacturers want to pass on the increased subsidy benefit to consumers and are holding off on deliveries until the process is complete,” said Ravneet Phokela, chief business officer at Ather Energy.
He also added that both their models, the Ather 450 and 340, are currently in the middle of the registration process, and are not available to customers yet.
What Is FAME II And Why Is It Important?
The central government’s second phase of the FAME scheme was launched with an outlay of INR 10,000 Cr ($1.4 Bn) which would be invested over a period of three years. Thus, all new vehicles have to follow the Fame II certification rules till 2022 at the very least.
The second phase of FAME is focussed on providing incentives to EV manufacturers for the production of the vehicles. The scheme is also emphasises localising production lines of EVs, with automakers mandated to have at least 50% locally-produced vehicle parts in order to claim the incentives. Manufacturers can, of course, choose to not follow this scheme, but they will not be able to claim any incentives or rebates from the government, which could leave them at a cost disadvantage.
The second phase of FAME garnered a mixed reaction from the industry, especially because it doesn’t address the gap in localised manufacturing but only stipulates that companies need to adopt parts made in India. It also doesn’t address needs such as public EV charging stations, which companies have been calling for. SMEV had pointed out that the localisation mandate makes it almost impossible for any manufacturer to avail the scheme, as Indian component suppliers are not yet manufacturing components given the low sales volumes of EV.
The proposed scheme is said to affect the e-bikes market the most as the government reduced incentives from INR 22K per kWh of battery capacity to INR 10K per kWh. In a letter to NITI Aayog, SMEV had claimed that city-speed electric two-wheelers could become costlier by INR 10K to INR 12K.
“Most of the vehicles manufacturers till date were importing 90% of the components with hardly any value-add in India. Due to the FAME II guidelines applicable, they are now compelled to re-align their strategies of production, hence the dip in sales in the month of April which may continue for a few more months,” said Vineet J Mehra, managing director of DOT, a logistics provider which uses electric vehicles for deliveries.
While explaining the government’s initiative to support the electric vehicle industry, SMEV’s Gill suggested the centre should not attempt to influence market forces.
“Incentives are a welcome move as, without it, the electric mobility space will not work but in market forces, the government cannot interfere,” said Gill.
“Let the market forces decide which vehicle will sell, which customers will buy what. The government must support the electric vehicle industry through direct incentives to the customers, not interfere with technical parameters and market forces,” he added.
