Electric vehicle adoption has been slowly picking up pace in India, as the government, manufacturers and suppliers work together to make offerings better suited for the market. The initial growth is expected to be driven by two-wheelers, which is where we’re seeing the most activity these days. The Union government has just announced the biggest update to the FAME II policy, which will further accelerate EV adoption.
This piece contains inputs from Tarun Mehta, CEO and Co-founder, Ather Energy
The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy had an initial budget of Rs 10,000 crores till March 2022, but only about Rs 492 crores has been allocated till now (via Mint).
The FAME II policy has now been updated in what might be the most substantial step to assist EV adoption, especially for two-wheelers. We also talked to industry leaders to understand the implications on the entire industry and the future of electric vehicles in India.
Freaking demonetization moment for the EV industry ⚡️🚀🚀🚀June 11, 2021
FAME II policy amendment: what’s new
There are two major changes in the policy, effective June 11, 2021. Firstly, the subsidy amount has been increased by 50% from Rs 10,000 to Rs 15,000 per kWh of battery capacity. Secondly, the maximum subsidy limit has been increased from 20% to 40% of the total cost of the vehicle. With these, OEMs will be able to reduce the cost of their vehicles for the consumers.
While a lower selling will invariably increase the demand, the effects of the policy could actually have much bigger implications on the industry. TechRadar India talked to Tarun Mehta, CEO of Ather Energy to get an inside look.
Ather will pass the added benefits to the consumers — making the Ather 450X cheaper by Rs 14,500.
The flagship Ather 450X electric scooter is now cheaper by Rs 14,500 across the country, taking the price down to Rs 1,44,500 in Bangalore. In places like Delhi which has additional state subsidies, it can be bought for Rs 1,32,426. The benefits will be available only for new customers and not existing owners.
Tarun tells us that this brings the total cost of ownership of an electric scooter much closer to that of a comparable ICE scooter. Taking into account the rising petrol prices recently, and EVs begin to make more sense. The break-even period will no longer be multiple years of heavy usage to offset the fuel expenses.
Govt of India doubles down on its commitment towards #goingelectric. Subsidy for electric 2W increases under #FAME2 incentives. Which means a whopping ₹14,500 additional subsidy on the #ATHER450X. Haven't booked it yet? Now seems like a good time: https://t.co/HNCOb2bGc9 pic.twitter.com/t2qD3c5Qq6June 11, 2021
The impact on the e2W industry
We asked him about how much of an impact this revision would bring, as it would account for only about a 10% reduction in the selling price of the Ather 450X, which is clearly a premium vehicle. While he didn’t have exact figures to share, he explained that the new price makes it accessible to a lot more people who were on the edge. It will no longer be reserved for the urban commuter.
Ather Energy has a plan to expand to 30 cities by the end of this year. With the new cost structure, it will be looking at 100 additional markets to tap into, furthering its penetration beyond the metros.
More importantly, since the batteries will now contribute lesser to the bill of materials, it will allow OEMs to consider new products for different segments of the Indian market. Tarun even went on to say that their next vehicle’s development can now be fast-tracked, without getting into the details.
He believes that the electric two-wheeler market will require handholding only for a few years till it reaches a size of about 10 million units in the country. That was earlier expected to take 10 years, but could now be achieved in as little as 3-4 years. The new subsidy structure will also provide a fillip to smaller companies for whom economies of scale would have been difficult to achieve earlier.
The next steps
The move was not really a surprise for EV manufacturers as higher subsidy rates been asked for years, but they did not expect that to materialize so soon.
When asked about what would be the next step to encourage electric vehicles in India, Tarun was quick to talk about charging infrastructure. His suggestion included mandating apartment complexes to have the provision for adding charging stations by having a space that has access to a simple three-pin 5A socket. It should be enough to take care of the last bit of anxiety that potential customers have.
“Public charging is cool to have and addresses range anxiety, but it is home charging that is the real advantage over ICE vehicles. With the right policies in place, we could see 10x fast EV adoption.”
“The revision in the FAME policy, increasing the subsidy by 50% per KWh is a phenomenal move. Sales of electric two-wheelers have grown despite the pandemic and with this additional subsidy, we expect electric two-wheeler sales to disrupt the market, and clock 6 million+ units by 2025. Ather Energy already has plans to expand distribution to 30 cities in the next 6 months and this increased subsidy will help accelerate consumer demand, immensely. The government's continued support to drive adoption of EVs, with a keen focus on locally built electric two-wheelers will make India the manufacturing hub of EVs”, said Tarun Mehta.
What the biggest players had to say
Suhas Rajkumar, Founder, and CEO of Simple Energy: "The increase in the subsidy is very exciting and positive news for the two-wheeler EV industry. Manufacturers like us will benefit as this move will significantly improve the unit economics and accelerate the EV adaption as it becomes much more affordable. This will be the right push for the industry which is still considered to be at a nascent stage. Our pricing would also be affordable as the announcement has come in right before the launch of our flagship product (Simple Energy Mark 2) on 15th August this year."
Bhavish Aggarwal, Chairman and Group CEO, Ola: “I welcome the government’s amendment to the FAME II subsidy. The incentive of Rs15,000 per KWH will help make electric two-wheelers affordable for many more consumers. I believe India has the potential to lead the world in sustainable mobility and become a big market as well as a global EV manufacturing hub. Our Ola Futurefactory will be coming online soon and we will be aggressively pricing our range of electric scooters. With the policy incentives, we will be able to accelerate the global transition to sustainable mobility even faster.”
Rahul Sharma, Founder, Revolt Motors: “The recently announced modification in the FAME India Phase 2 scheme will prove to be a game-changer. The increase in financial incentive will further help in boosting the adoption of products in the category and is a reinforcement of the government’s commitment and intent for the EV industry. We are very pleased with this development as Revolt plans to reopen booking and further expand into newer markets. Such interventions coupled with the ongoing focus on infrastructure development can accelerate the growth of the sector immensely.”
Jeetender Sharma, MD & Founder, Okinawa Autotech: “The E2W industry is once again experiencing a positive sentiment and a high level of interest from the Government of India. The government of India's revisions to FAME-II subsidies is a welcome step that will only add zeal to the adoption of electric vehicles. Lowering the prices of electric scooters in the country will really help to persuade more riders to switch from a combustion-engined model to an electric one. We have always emphasized the importance of creating an ecosystem for EV mobility, and this new revision to the FAME II scheme is an important step in that direction.”
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