• “India’s Electric Two-Wheeler Prices Skyrocket as Subsidies Hit All-Time Low – Massive Rush Expected Before June 1!”
• “FAME-II Subsidy Reduction Sends Shockwaves Through Electric Two-Wheeler Market – Last Chance for Bargain Hunters!”

Electric two-wheelers in India are slated to become more expensive starting June 1, 2023, as the incentive threshold has been reduced to 15% of the EV’s ex-factory price, down from 40% previously. That is a significant reduction, which will inevitably result in increased vehicle pricing.

Furthermore, according to a gazette notification issued on May 21, the Ministry of Heavy Industries has reduced the FAME-II subsidy level to Rs 10,000 per kWh from Rs 15,000 per kWh.

The three-year FAME-II scheme, for which the government set up Rs 10,000 crore, began on April 1, 2019 and gained a two-year extension in June 2021, bringing the scheme’s effective term up to March 31, 2024.

In order to boost demand for electric two-wheelers, MHI upped the demand incentive from Rs 10,000 per kWh to Rs 15,000 per kWh in June 2021, with the maximum cap increasing from 20% to 40% of the EV’s cost. The government’s most recent measure reduces the subsidy even farther than it was two years ago.

According to the FAME India dashboard, as of today (May 22, 2023), a total of 9,88,676 EV two-wheelers have been sold in India. The FAME-II Scheme includes subsidies for 10 lakh electric two-wheelers, 5 lakh electric three-wheelers, 55,000 e-passenger cars, and 7,090 electric buses. The two-wheeler category is only 11,324 units short of its goal.

In FY2023, EV sales across vehicle segments reached a record high of over 1.17 million units, with the two-wheeler industry accounting for 61 percent (7,20,733 units).

Electric mobility on two wheels will grow more expensive.

As a result of this current modification, all electric two-wheeler manufacturers who qualify for the FAME-II subsidy will almost certainly have to raise their product pricing by Rs 25,000-35,000. For example, the subsidy amount available for the Ather 450X and Ola S1 Pro is currently between Rs 55,000 and 60,000, and with the updated rates, the subsidy amount will be cut in half.

This cut in FAME-II subsidies comes at a time when the domestic electric two-wheeler market, which topped 7,00,000 units in FY23, is experiencing a month-on-month sales fall. In April 2023, retail sales of scooters fell to 66,810 units, compared to a monthly average of 75,000 units in the previous quarter.

According to an Ola Electric representative, “no decision has been made on the price hikes, and the team will be meeting on Monday [May 22] to consider an appropriate pricing decision in light of the renewed situation.”

Ola Electric CEO Bhavish Aggarwal has stated that the company was preparing to live without subsidies. “Even if the subsidies are stopped, Ola has prepared itself to live in a world without subsidies, as we are developing technologies in-house and doing large-scale manufacturing from day one,” he had stated.

Some EV producers will benefit from the PLI Scheme

According to industry observers, this latest move may place certain EV makers in a better competitive position than those who did not invest under the government’s Production-Linked Incentive (PLI) Scheme.

According to Raghunandhan NL, equities analyst at Nuvama Institutional Equities, the reduction in subsidies will slow the pace of EV adoption and raise vehicle pricing. Large firms such as TVS, Bajaj, Hero MotoCorp, and Ola Electric, on the other hand, may mitigate some of the subsidy loss through PLI plan benefits.

“This would result in increased market share for these players while decreasing market share for smaller players/start-ups who have not qualified for PLI scheme benefits.” “The slower rate of EV penetration may have an impact on valuations for companies that benefit from the EV transition,” Raghunandhan noted.

With only a few days till the decreased FAME-II subsidy for electric two-wheelers kicks in, anticipate purchasers to rush to zero-emission scooters and motorbikes to reap the most benefits.