Electric two-wheelers weigh the cost of subsidy cuts

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₹12,000 in FY25. Will it undermine growth in an industry that is already facing multiple headwinds? Mint finds out. The electric mobility promotion scheme was announced by the ministry of heavy industries in March with a duration of four months from April to July 2024.

It acts as a bridge scheme between Fame 2, which expired on 31 March 2024, and the likely announcement of a new scheme in the full budget in July after the new government is sworn in post the general elections. Under this scheme, the subsidy for electric two-wheelers has been halved from ₹10,000 per kilowatt hour (kwh) to ₹5,000 per kwh. The maximum subsidy per vehicle has also been capped at just ₹10,000.

Since the announcement of the Fame 2 scheme in 2019, this is the third time the subsidy on electric two-wheelers has been revised. The original scheme, announced with an allocation of ₹10,000 crore for five years, provided a subsidy of ₹10,000 per kwh, which was capped to 20% of the ex-factory price of a vehicle. This was hiked to ₹15,000 per kwh in June 2021 and the cap was also increased to 40% of the cost of a vehicle.

In June last year, the government reversed the subsidies back to the original levels. The new scheme reduces it further and subsidies are now at their lowest level since 2019. The subsidy cut will take up the price of electric scooters by ₹5,000-12,000, although manufacturers may decide to absorb some of it.

For example, the subsidy on the Ola S1 Pro now comes down to a flat ₹10,000 from ₹22,268. Till June last year, the scooter received a subsidy of almost ₹60,000. For now, Ola has decided not to increase the price of the scooter.