Mint Explainer: The EV incentive conundrum

livemint.com:

subsidies may be tapered in favor of a smaller outlay under a new or extended version of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME-II scheme. Government officials with direct knowledge of the discussions told Mint on Wednesday that could be the case. For now, uncertainty surrounds the fate of electric vehicle (EV) incentives, with the ₹11500 crore FAME-II scheme set to expire this financial year, sparking discussions about the potential transition to FAME-III.

In June 2023, the Indian government substantially reduced the subsidies for electric two-wheelers under the FAME-II scheme. These vehicles, which benefited the most from the scheme, saw their subsidy rates cut from a generous 40% of the ex-showroom prices to just 15% of the ex-factory prices. This decision, although anticipated by the industry, led to a challenging adjustment period for the industry.

The government aimed to reallocate resources to support its ambitious goal of subsidizing 1 million electric scooters. This involved rejecting subsidy claims for over 400,000 e-scooters on the grounds of non-compliance with the government's localization requirements. Despite these reductions, subsidy support under FAME-II has been extended to over 12.20 lakh electric scooters, surpassing the government's initial target.

To maintain sales momentum, aggressive pricing strategies, such as deep discounting, were adopted by OEMs such as Ola Electric, the country's largest e-scooter maker at present. However, the immediate aftermath of the subsidy cut saw a notable drop in e-two-wheeler sales to 46,000 units monthly from an average sales rate of 66,600 units in the first half of 2023. This decline underscores industry concerns that