No proposal yet to extend FAME subsidies after FY24, say government sources

The SMEV has said the government probe into the alleged misappropriation of the FAME scheme has held up subsidies to the tune of Rs 1,200 crore. Currently, due to the ongoing probe, subsidies of 13 EV players including Hero Electric and Okinawa are on hold since May last year.

Sohinder Gill, CEO of Hero Electric and Director General of the Society of Manufacturers of Electric Vehicles (SMEV), said that the lack of working capital has made a huge impact on original equipment manufacturers (OEMs). “Banks have withdrawn their support, and it's only a matter of time before all EV OEMs face the heat,” Gill said.

Both Hero Electric and Okinawa have seen a 48 percent drop in sales in March and SMEV has said that the stopping of subsidies has led to a 25 percent shortfall in sales since the festive season last year.

The Department of Heavy Industries is also examining complaints against TVS, Ola, Ather and Hero MotoCorp for allegedly pricing scooters above the Rs 1.5 lakh limit under the FAME scheme and still availing subsidies. All four companies are in touch with the government and are examining various options.

Ather has recently slashed the prices of its top variant to Rs 1.45 lakhs to meet the FAME eligibility criteria. Industry sources say that if companies are asked to include the cost of the charger in the cost of the electric scooter, then that could bring down profit margins. But, if subsidies for the four companies continue to be held up then that could lead to a drop in sales volumes, said an industry source.

Shamsher Dewan, Vice President of ICRA, highlighted that if subsidies go away, a large part of the cost will have to be borne by the OEMs as they may not be able to pass on all the costs to customers. “This would defer the path to profitability for OEMs, making it even more challenging to grow the industry,” Dewan said.

While the government considers how to move ahead with the probe against 13 EV companies for alleged misappropriation of subsidies, the industry will have to prepare and review its product strategy in light of a zero subsidy scenario after March next year.