Get ready to pay more for your electric scooter

What are the planned changes?

From 1 June this year, the government will significantly reduce the subsidy it offers on electric two-wheelers to customers under its FAME-II scheme—from a ceiling of 40% of an electric two-wheeler’s ex-showroom price to now only 15% of its ex-factory price. Subsidies will be offered at the rate of ₹10,000 per kWh of battery capacity in the vehicle, which is also lower than the ₹15,000 per kWh of battery capacity incentive manufacturers availed earlier. A scooter should have a maximum ex-factory price of ₹1.50 lakh for the manufacturer to avail FAME-II incentives.

How will the move impact customers?

Buyers of electric two-wheelers will pay more for the vehicles from 1 June. The significant cut in subsidies means that e-two-wheeler makers who could claim up to ₹60,000 in subsidies per vehicle, will now only be able to claim a maximum of ₹22,500 subsidy per vehicle (15% of ₹1.5 lakh), leading to a wide gap in the prices of a conventional internal combustion engine (IC-engine) scooter versus an electric one. Manufacturers are looking for the middle ground by absorbing some of this additional cost on the one hand, and passing on some of it to customers in the form of a higher sticker price on the other.

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How will lower subsidies impact demand?

The fast pace of EV adoption is driven largely by two-wheelers, and that too after the government raised subsidies in 2021. Now India has a nearly 5% adoption rate for EVs in the two-wheeler segment. This, stakeholders believe, may not be the point at which self-sustaining organic demand is created. Demand could suffer in the short-term, they say.

Do EV makers get any other support?

Customers and makers of EVs are incentivized in three ways: 1. the central government offers FAME-II incentives and auto PLI benefits to EV nakers (but these haven’t been paid yet), 2. twenty-six state governments have EV policies which offer incentives to customers in addition to FAME-II, and 3. customers get the benefit of lower GST and a waiver on or reduced road tax and registration costs in many states. EV makers see this as a time to get the market to adjust to a post-subsidy pricing era, where prices will be higher.

Will FAME be extended beyond FY24?

The FAME-II scheme with its ₹10,000 crore corpus is set to lapse after FY24. But stakeholders have been discussing an extension for two more years. A decision may be expected by October. The govt has received claims for nearly 1 million e-scooters by the end of May but rejected more than 400,000 of those for non-adherence to localization norms. It has sought to recover these subsidies and asked some makers to refund part of the subsidy to customers, freeing up subsidies to be used for claims for the rest of the fiscal.