Electric Two-wheelers All Set to Get Costlier from June 1 Following FAME II Revision

The Ministry of Heavy Industries has reduced the FAME-II subsidy, which would increase the price of electric cars. The maximum amount of subsidies available for electric two-wheelers has been reduced from 40 per cent to merely 15 per cent. Electric two-wheeler subsidies have been lowered from Rs 15,000 to Rs 10,000 per kWh of battery capacity. Beginning on June 1, 2023, the new amendment will be in effect. To put things into perspective, the Ather 450X Pro Pack's price tag was previously lowered to Rs 55,500, making it Rs 1.28 lakh (ex-showroom, Bengaluru). With the new regulations in place, this subsidy will instead be reduced to Rs 37,000. The remainder of the electric bikes and scooters sold in the Indian market will see a similar outcome. It is important to note that in order to qualify for the subsidy, any two-wheeler must match the criteria set forth. These requirements include an 80 kilometre minimum range, a peak speed of at least 40km/h, and a certain degree of localisation. There is also an extra subsidy provided by several state governments. These, however, differ from state to state.

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Here's What the Industry Has to Say

Few well-known figures in electric two-wheeler operations have responded to the government's decision to reduce incentives, albeit the majority of manufacturers have not yet done so. In response to the news, Tarun Mehta, co-founder of Ather Energy, tweeted that the industry "must stand on its own feet very soon" as a result of the subsidy cut. Mehta cited a tweet from Ather's official account on the site that stated pricing for the 450X might increase by as much as Rs 32,500 starting on June 1. 

Further, Vivekananda Hallekere, CEO of Bounce, also posted on Twitter, calling the drop in subsidies "a great move" since he thinks the programme wasn't "logical" in its current form and that producers were being "incentivised to be inefficient." Significantly, electric two-wheelers with smaller batteries, like the Bounce Infinity E1, would have a much lesser fall in subsidy amount; the greatest subsidy available for it up to this point was Rs 28,500.

Price Impact on Range-Topping Models

Due to their large battery packs, premium models from producers like Ola Electric, Ather Energy, Tork Motors, and Hero MotoCorp (Vida), which previously qualified for an incentive of up to Rs 60,000, will now be eligible for a maximum incentive of Rs 22,500, which is less than half of what was previously offered. Their prices are therefore anticipated to increase significantly as a result. 

The subsidy for the Ather 450X, which has so far been eligible for an incentive of up to Rs 55,000 would decrease by about Rs 32,500. Ola's S1 and S1 Pro would receive subsidy cuts of Rs 22,000 and Rs 37,000, respectively. The Hero Vida V1's incentives have been reduced by Rs 28,500 to Rs 37,500, while Tork's Kratos R will also see a cut in subsidies of Rs 37,500. The TVS iQube and the Bajaj Chetak, two models with comparably smaller batteries, would see a reduction in their subsidies of Rs 28,500 and Rs 22,500, respectively.

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It is yet unknown if companies would immediately increase prices for buyers in order to pass on the whole subsidy cut. The majority of manufacturers, especially start-ups, will inevitably be forced to pass on a significant portion of the vehicle's price that was previously covered by incentives to the end buyer, which could be anywhere between Rs 15,000 and Rs 30,000, depending on the model and manufacturer, as input costs have only increased over the last 24 months and battery prices have not decreased. Sales of electric two-wheelers are anticipated to reflect this nationwide and to slow down as a result during the next months.