Electric bikes may get costlier under new FAME regime

As finer details of the second phase of Faster Adoption and Manufacturing of Electric & Hybrid vehicles (FAME) scheme emerge, two-wheeler manufacturers are beginning to feel that the subsidy system under the new regime will end up making the vehicles more expensive in comparison to FAME-I.

Two-wheeler and component manufacturers claim that localisation and time-bound Custom duties criteria in the new policy may hamper the growth of the industry, making the vehicles costlier. The new policy, if implemented in its current form, may affect the supply chain players, who would further shy away from investing in the EV sector.

As a result, the worried electric two-wheeler manufacturers and component makers have been holding meetings with the government officials including those from Niti Ayog and transport ministry in order to make a course correction. At present, there are 12 original equipment manufacturers (OEMs) involved in the manufacturing of two-wheelers in India. "Nobody is opposing it. But the government should wait for the volume (of electric two-wheelers) to pick up before imposing norms regarding battery power, localisation and Custom duties," said an executive working for an OEM.

Earlier this month, the Cabinet had approved Rs 10,000 crore for FAME-II scheme which sets aside subsidy for electric vehicles. The incentives are primarily targeted at two-wheelers, three-wheelers, fleet taxis buses as a sizeable number of Indian public travel in it. Parallelly, the government also announced a plan to set up Tesla-like battery manufacturing Giga plants in India under National Mission on Transformative Mobility (NMTM). The plan, which will be phased over a period of five years, envisages a few large-scale, export-competitive integrated batteries and cell manufacturing plants.

The first phase, FAME-I, was introduced in 2015, offering incentives of up to Rs 29,000 for hybrid and electric two-wheelers and Rs 1.38 lakh for cars.

According to the industry insiders, under FAME-I regime, the subsidy was Rs 20,000 flat for two-wheelers without any condition for the power strength of the battery.

But under the new regime, the subsidy is Rs 10,000 for battery strength of 1 kiloWatt. "That means the same two-wheeler will now have a ticket price which will be Rs 10,000 costlier," said an industry insider aware of the talks being carried out by the OEMs with the government officials.

Analysts say the electric vehicles industry is at a nascent stage in India, comprising less than 1% of the total vehicle sales but has the potential to grow over 5% in the next few years.

At present, there are more than four lakh electric two-wheelers and a few thousand electric cars on Indian roads. The industry volumes have been fluctuating, mostly depending on the incentives offered by the government, the experts added. Further, over 95% of electric vehicles are low-speed scooters (less than 25kilometre/hour) that do not require registration and licences.

Sohinder Gill, director general, Society of Manufacturers of Electric Vehicles (SMEV), claims that the component makers are required for the manufacturing of motors, controllers, batteries, moulded parts, etc. The manufacturers often back off after realising the low volume and few of those who come forward quote exorbitant prices, making EVs costlier and driving down their volumes. "Therefore, the localisation is more a matter of volumes than a function of time," said Gill. Likewise, since the volume is too small at present, the government should also be considerate about the Custom duties which it plans to levy around the import of components.

A general belief in the industry is that the only way to trigger "Make in India' is to bring the prices of first one or two million e-two-wheelers and other EVs closer to the petrol ones through policy interventions. That will automatically attract business houses to start investing in EV components.

"Unfortunately, FAME-II may just do the opposite as the prices of affordable two-wheelers are going to become substantially higher from next month due to lower subsidies resulting in a drop in overall sales of EVs," Gill adds.

Naveen Munjal, MD, Hero Electric Vehicles Pvt Ltd, earlier said in a statement, "While the move to implant this policy will promote sustainability and will encourage faster adoption of electric and hybrid vehicles, the new policy outlay for electric two-wheelers should not only focus on the battery power but also on speed and range of the vehicles."

A recent Icra report claimed that the battery cost of EVs, accounting for almost one-third of the total cost, will remain a key determinant in the rate of acceptance of EVs globally. In a significant development, the cost of lithium-ion EV battery has fallen to almost one-fourth to $208/kWh in 2017 from $800/kWh in 2011.

LOW ON CHARGE

• Under the new regime, the subsidy is Rs 10,000 for battery strength of 1 kiloWatt.
   
• Under FAME-I, the subsidy was Rs 20,000 flat for two-wheelers without any condition for the power strength of the battery
   
• That means the same two-wheeler will now have a ticket price which will be Rs 10,000 costlier