Is FAME (EV incentives) the first initiative to support EV adoption in India, or were there previous efforts? If yes, what were the results, and more importantly, can past initiatives provide insights into EV adoption in India?
“The extension of the Government of India’s Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) is of critical importance for players like us,” Ayush Lohia, CEO of Lohia Auto, shared with Electronics For You Network during a conversation.
Reflecting on the past, he also highlighted how the electric vehicle industry was considered a ‘not-so-important industry’ before 2014.
He added, “In 2013-14, before the BJP came into power, a similar kind of adoption was happening in India’s EV scene. However, due to the improper implementation of the then National Electric Mobility Mission Plan (NEMMP), the industry was reduced to shambles.”
According to him, the number of EVs sold in India fell to 1/10th of the original figure, and many EV distributors closed shop in 2013-14. Various reports available on the internet today suggest that the retail sales of electric two-wheelers dropped to 21,000 units from 100,000.
Additionally, out of approximately 2000 EV distributors in India, around 900 had closed. This resulted in end consumers struggling to find service, repair, and maintenance services for EVs they had invested in earlier.
“The same would have led to strong word-of-mouth against EVs, and many potential consumers would have rejected investing in EVs,” he said.
Lohia mentions that although the adoption of EVs in India under the current regime has been better, the rumours that FAME might not extend after this year or the next might result in a situation similar to what happened before 2014.
Notably, 26 out of the 35 heavyweights from the electric two-wheeler manufacturing industry (From November 2010 to March 2012) had closed by the end of 2013. These included companies such as BSA, Luminous Power Ultra Motors, and more, resulting in 10,000 direct and indirect job losses.
According to the Society of Manufacturers of Electric Vehicles (SMEV), “Electric two-wheeler sales dropped from 100,000 units in 2011-12 to 42,000 in 2012-13 and 21,000 in 2013-14.”
Question mark over FAME for 2Ws!
Since a few companies were caught flouting the FAME norms last year, the entire E2W industry has been concerned about the possibility of FAME 2 subsidies for E2W being discontinued! Earlier last year, the Ministry of Heavy Industries (MHI) revised the cap of the FAME 2 incentive to 15% of the ex-showroom price of the two-wheeler EV, which was lower than 40%. The subsidy was reduced from ₹15,000/kWh to ₹10,000/kWh.
The Federation of Indian Chambers of Commerce and Industry (FICCI) has also recently requested that the government of India provide a five-year continuation of the FAME 2 scheme. It noted that discontinuing FAME 2 will result in approximately a 25% price hike for EVs in India. Though Dr Hanif Qureshi, Additional Secretary, MHI, has recently confirmed that FAME 2 benefits will continue beyond March 2024, the exact time duration these will be available is not yet clear.
Lohia said, “The price parity between petrol-powered two-wheelers and electric ones is of utmost importance. The same goes for the E3W industry. The momentum in the EV adoption rate in India has picked up and will continue if the government keeps encouraging the sector through subsidies or other means.
The 2010 to 2014 story
In 2010, the Government of India (GOI) first announced its intentions to support the EV industry. Back then, financial support of over
million for EV manufacturers was announced by the New and Renewable Energy Ministry. In contrast, the current objective of the government has been to promote the localisation of EV manufacturing.
The then Government of India, headed by Congress, had also reduced the import duty on batteries from 26% to 4%. The scheme included incentives of up to 20% on ex-showroom prices, subject to a maximum limit depending on vehicle form factors. For example, it was ₹100,000 for an electric car.
A study commissioned by the GoI in 2010 noted that India had the potential to deploy approximately seven million EVs on the road by 2020. Then, in August 2012, the GoI announced and approved the NEMMP 2020 scheme. Under the same, it said an investment of up to ₹140 billion would be made to create the infrastructure required to promote EVs in India.
Arun Jaitley, while presenting the Union Budget for 2015-16, announced FAME for the first time in India. In 2017, Transport Minister Nitin Gadkari said that India intends to move to 100% electric cars by 2030. With the automobile industry raising concerns over the execution, the GoI had revised the 100% figure to 30%.
Lohia said, “It is imperative that the policies, once announced, continue. Otherwise, investors might see the efforts as unstable and not long-term. We have been selling E3Ws and slow-speed electric two-wheelers in India since 2012 and are now in the process of entering the high-speed vertical as well. However, the last few months have made us revisit our decision a few times.”
By mentioning the last few months, he is probably referring to the violations that have taken place in India’s EV space. Companies, including Ola Electric, Ather Energy, TVS Motor, Hero Electric, Okinawa, and more, have been asked by the GoI to return some incentives due to these companies not complying with the FAME norms.
Under the FAME scheme, a total of 1,327,250 EVs have been sold in India so far. The MHI’s FAME 2 portal also reveals that the E2W and E3W segments in India are leading the clean fuel adoption in the country. Currently, a total of 165 EV models are approved under FAME 2.
Ayush Lohia is CEO of Lohia Auto
