homeauto NewsElectric two wheeler subsidy cut: Cost of ownership and payback period will rise, says expert
Electric two-wheeler subsidy cut: Cost of ownership and payback period will rise, says expert
Under the revised guidelines, the incentive cap on e-scooters has been reduced from 40 percent to 15 percent of the vehicle's ex-factory price. This reduction will limit the subsidy available to manufacturers, thus increasing the financial burden on buyers. Additionally, the demand incentive per kilowatt hour has been decreased from Rs 15,000 to Rs 10,000.
Effective from June 1, electric two-wheelers in India may become costlier due to a significant reduction in subsidies under the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme. The government has recently announced a cut in incentives for e-scooters, affecting both the incentive cap and the demand incentive provided to manufacturers. This move has prompted industry experts to predict a potential increase in prices across various electric vehicle (EV) brands.
Under the revised guidelines, the incentive cap on e-scooters has been reduced from 40 percent to 15 percent of the vehicle's ex-factory price. This reduction will limit the subsidy available to manufacturers, thus increasing the financial burden on buyers. Additionally, the demand incentive per kilowatt hour has been decreased from Rs 15,000 to Rs 10,000.
According to industry sources, various EV companies are currently evaluating price increases, which could result in a price hike ranging from Rs 11,000 to Rs 30,000.
Shamsher Dewan, Senior Vice President at ICRA, in an interview to CNBC-TV18, stated that the total cost of ownership with reduced subsidy will go up, and the payback period will rise to 5 years from 3 years.
"If the OEMs take a decision to completely pass on the impact of reduced subsidy to the end customers, then it will certainly impact the end price for the consumers. Based on estimates that we have, today the payback period on a total cost of ownership for electric two wheelers with the current FAME-II subsidy mechanism is close to about 3 years. However now with the reduced subsidy and if the OEMs pass on the impact, the payback period will increase to about 5 years and the initial cost of ownership will also go up. So the reduction in subsidies will slowdown EV penetration in the two wheeler segment,"Dewan said.
Also Read: Investing in EV Sector! Here's what the early-stage investors should look for before venturing
However, on a positive note, many companies are expected to start manufacturing battery cells locally. By 2026, battery cells are set to be localised, reducing dependence on imports and enhancing the domestic production ecosystem, Dewan added.
Anshul Gupta, Managing Director of Okaya EV, highlighted that the reduction in subsidy will compel EV manufacturers to come out with new products. However, Gupta also mentions that consumer prices are expected to rise significantly, with estimates ranging from Rs 20,000 to Rs 45,000.
Watch video for entire discussion.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Shehnai by Ustad Bismillah Khan's kin, ode to Kashi's celebrities: PM Modi's roadshow to showcase Varanasi's grandeur
May 13, 2024 11:03 AM
Piyush Goyal speaks on '400 paar' target, Maharashtra power play and more | Full text
May 13, 2024 9:00 AM
Why low voter turnout continues to be a serious subject of discussion as Phase-4 voting begins today
May 13, 2024 8:32 AM
Only 12% of candidates in fray in phase 5 are women, says ADR
May 13, 2024 7:15 AM