Electric Vehicles FAME II subsidy: All you need to know
- Where did FAME II come from?
- What is the current FAME II subsidy?
- Is the current FAME II scheme enough?
If the world of EVs intrigues you, you might have heard about the FAME II subsidy. The government of India has been pushing for the adoption of electric vehicles including buses, three-wheelers, passenger cars and two-wheelers – both scooters and bikes for the past couple of years.
They have introduced various schemes that helps bring down the price of electric vehicles and even get you tax rebates, should you choose to borrow from the bank for your electric vehicle. State governments have taken it upon themselves to sweeten the deal further with their own individual plans to stimulate the growth of this new industry. While some have offered add-on subsidies, others are wooing manufacturers to set up their electric vehicle manufacturing factories.
As of January, the government of India states close to 2.25 lakh vehicles [https://fame2.heavyindustries.gov.in/] have been sold under the scheme. But what exactly does the FAME II subsidy for electric vehicles entail? Let's have a detailed look at what it means for electric scooters and bikes, the largest target section, in particular.
How was the Electric Vehicles FAME II subsidy conceived?
FAME or Faster Adoption and Manufacturing of Electric vehicles was conceived by the government of India to narrow the gap between prices of traditional internal combustion (petrol, diesel) vehicles and electric vehicles – cars, scooters and three-wheelers, hybrids included. They introduced the scheme in April, 2019 to encourage the switch to electric mobility with a firm goal in mind to reduce carbon emissions in line with the COP 21 agreement and also save fuel.
The government went ahead and allotted Rs 10,000 crores to achieve this with a target to subsidise 500,000 EV3W, 55,000 EV4W and a million electric scooters and bikes.
The initial FAME II subsidy was applicable for any electric scooters and bikes with a minimum range of 80km (under the Indian Driving Cycle) and a minimum top speed of 40km/h, the TVS iQube betters both by some margin, along with a host of other criteria regarding battery chemistry, localised production and so on. Basic requirements to qualify for the L1 and L2 electric two-wheeler subsidy that was formulated in 2019 can be found here
However, this criteria eliminated a large section of electric two-wheelers available, largely the low-speed category. The initial subsidy amounted to ₹10,000 per kWh and was capped at 20% of the cost of the vehicle. In June 2021, the government has revised the subsidy available to improve the rate of adoption of EVs, which had been relatively low till then.
What is the current FAME II subsidy Electric Vehicles?
Faster Adoption and Manufacturing of Electric Vehicles in India (FAME II) was revised to offer 50% more subsidy than it was initially constituted for. In effect it has moved from Rs 10,000 per kWh to ₹15,000 per kWh with the maximum subsidy capped at 40 percent of the cost of the vehicle
With the increase in subsidy, electric scooters and bikes have narrowed the gap even further, when compared to purchasing a petrol variant. With the barrier of cost of ownership coming down even further and the prices of fuel going up, it now makes even more sense to move to electric mobility and the government hopes for better adoption.
Already in the months following from June 2021, when the revision was announced, a further 150,000 vehicles have been sold, under the scheme, compared to the 78,000 between April 2019 and June 2021.
To give you some reference, the TVS iQube Electric was available at an ex-showroom price of ₹ 121,756, in Bangalore, before the revision in subsidy and is now available at ₹ 110,506. An effective price reduction of ₹11,250, at the showroom. If you happen to be in a state where further subsidies are available, the decision to buying an electric scooter may be even simpler. This, of course, even before you count all the benefits from lower maintenance costs,
Currently, less than 1% of total vehicle sales in India are electric. With the FAME II subsidy from the Central government, and the State governments pitching in with their own, the hope is to change this statistic in the near future. The Central government has already extended the FAME II scheme to March, 2024 as less than 10% of the earmarked subsidy has been disbursed so far.
Is the current FAME II scheme enough?
The Central government has set a target for 30% of all passenger vehicles to be electric vehicles by 2030, which includes an ambitious mix of 80% of all two-wheelers being electric scooters and bikes by 2030. Efforts are being made on all fronts, from manufacturing to charging infrastructure, to realise a future with lower carbon emissions and reduced dependence on fossil fuels. A major section of electric scooters available remain excluded from the FAME subsidy and there has been a call for an inclusion of e-bikes as well.
However, manufacturers have embraced and applauded this move by the government. Sudarshan Venu, Joint Managing Director of TVS Motor Company, was especially pleased with this announcement. "We welcome the government's continued support to EVs" he said, "Sustainable mobility solutions are very important for the future and TVS is investing significantly behind this. The improved incentives for electric two-wheelers will increase penetration. Such policy direction should lead to the indigenous development of future technology".
We are already seeing this number increase, with 150,000 electric vehicles being sold after June 2021, a large chunk of which comes from electric scooters. This number is expected to reach over 300,000 for electric scooters alone, including low speed models, in 2022 according to Sohinder Gill, Director General of Society of Manufacturers of Electric Vehicles. Although these numbers are still well short of the target set by the government, of a million scooters, it is progress in the right direction.
With the pace of adoption of EVs picking up, and technology improving to make them more affordable and efficient, it is time for the infrastructure to pick up the pace. Subsidies cannot go on for an indefinite period. They were conceived to kick start the process of enabling a shift by breaking the largest barrier consumers face today, with respect to own an EV. The cost of acquisition. The FAME II subsidy addresses this concern ably and helps nudge people who have leaned towards this new form of mobility.
As time passes, more people will start to view electric scooters and bikes, like the TVS iQube, as a viable daily commute. In November 2021 alone, 42,067 electric scooters and bikes were sold as compared to the previous year's 12,858. With EVs having evolved to their peak and never having been more affordable, electric mobility seems to be India's future. Moreover, there are traditional manufacturers, like TVS, queuing up for a crack at delivering this new experience. If this has you thinking, you should possibly take the next step and check this out