Demand for electric two wheelers slowing down due to reduced government subsidy: Report

economictimes.indiatimes.com:

FAME subsidy is slowing down demand for electric two wheelers and the manufacturers will now have to focus on achieving price reduction through R&D and innovation, a report said on Thursday. The medium term sales trajectory for two wheelers, which include e-two wheelers as well, is anticipated to be modest, characterised by uncertainties and driven by a host of factors, it said.

In its report, CARE Ratings said the core segments of two wheelers, specifically the 75 cc — 110 cc range in motorcycles and the 75 cc — 125 cc range in scooters, have shown a sharp sales volume decline from FY19 to FY22, with a slight recovery seen in FY23. Sales of electric two wheelers also significantly declined in Q1 FY24 due to the government withholding FAME subsidies for certain Original Equipment Manufacturers (OEMs), it said.

Additionally, the report said that a subsidy reduction to Rs 10,000 per kWh from Rs 15,000 per kWh and 15 per cent of the ex-factory price from 40 per cent earlier, adds to the uncertainty in two wheeler sales. «Manufacturers of electric two wheelers will now have to focus on achieving price reduction through R&D and innovation, rather than on government subsidies,» it said.

In April 2015, the central government rolled out the FAME subsidy scheme to boost the sales of EVs with a budget of Rs 75 crore. The scheme entailed cash subsidy being credited to dealers of Electric Vehicles (EVs) to bring down the acquisition cost for vehicle buyers.

The budgetary allocation was subsequently increased on an annual basis along with the extension of the scheme, till FY19 when the budget stood at Rs 145 crore. From April 2020, it was replaced by the FAME II scheme, which entailed a massive increase in budget to Rs 10,000 crore