The Central Government has decided to reduce the subsidy under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) scheme on electric two-wheelers. The Ministry of Heavy Industries, in its recent notification, announced a modification in the FAME India Phase II scheme and dropped the subsidy on electric two-wheelers to Rs 10,000 per kWh from the existing Rs 15,000 per kWh and the maximum subsidy cap from 40 percent to 15 percent.
Since April 2023, electric-two-wheeler sales have been under pressure and have been falling after recording the highest monthly sales in March 2023 at 85,793 units. The sales of electric-two-wheelers stand at around 39,000 units in May so far, according to the Vahan portal.
The Ministry of Heavy Industries said that the modification in the FAME India Phase II scheme will come into effect from June 1, 2023, and would apply to all electric two-wheelers registered on or after June 1, 2023.
Meanwhile, the domestic EV industry is looking to tweak its offerings and prices to stay competitive in the market. According to the experts in the EV industry, the government’s continued policy support will help increase penetration from the current 5 percent to more than 60 percent for electric two and three-wheelers over the next decade.
Leading electric two-wheeler players are also likely to rejig their product portfolio by launching lower-spec variants and trims by reducing the size of batteries and features following the reduced subsidies. The reduced subsidy is also expected to result in higher prices of EV products from June onwards.
FAME India scheme, started in April 2019 and implemented in October 2019, enables the reduction of upfront EV costs for the customers, bringing it closer to the price of ICE vehicles and encouraging the adoption of EVs.
Moreover, due to the drop in overall two-wheeler sales in the country, the apex body of the Indian automobile retail industry, the Federation of Automobile Dealers Associations (FADA) had urged the GST Council for an immediate reduction in the GST rate on two-wheelers from the current 28 percent to 18 percent.
FADA wants to make two-wheelers more affordable and revive demand as the industry has seen a significant slump in sales over the past few years. Two-wheelers, which play a pivotal role in providing affordable mobility to a large number of India’s population, should not be categorised as sin goods or luxury items for GST taxation purposes, said FADA.
According to the FADA president, the reduction in GST will help make the two-wheelers more accessible for the common man and will also provide a much-needed boost to the industry, generating employment and fostering India’s overall economic growth.
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