Electric Scooters, Electric Bikes May Become Cheaper: FAME 3 Subsidies For EVs To Roll Out Soon

  • May 30, 2024
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Expect the new subsidy to come into effect by September 2024

If you have been waiting for electric scooters and electric bikes to get cheaper, you might not have to wait for long. The Indian government is formulating a third edition of the FAME (Faster Adoption and Manufacturing of Electric vehicles) subsidies. 

Journey Of FAME 2 Subsidy Scheme

The FAME 2 subsidy scheme came into effect from April 2019 and was applicable till March 2024. The government had allocated Rs 10,000 crore to help subsidise the EVs. Electric two-wheelers had to meet two criteria to qualify for the subsidies. First, they had to have a range of 80km and a top speed of atleast 40kmph. Then they had to be localised to a certain extent. If qualified, the central government would offer a subsidy of Rs 15,000 per kWh of battery capacity, but the maximum subsidy was capped at 40 percent of the vehicle’s total ex-factory cost. To know more about FAME 2, you can read our earlier story here

However, a few months before FAME 2 was phased out, the government reduced the subsidy to Rs 10,000 per kWh of battery capacity and a much lower 15 percent of the ex-factory price, resulting in a considerable increase in price. Before FAME 2 ended on March 31, 2024, FICCI (Federation of Indian Chambers of Commerce and Industry) requested the subsidy to be extended for five more years. You can read about their proposal in this story.

EMPS (Electric Mobility Promotion Scheme 2024) - A Stop-gap Measure

EMPS was announced in March 2024, and came into effect in April 2024. It is a stop-gap arrangement after FAME 2 to help stabilise EV sales during the period of General Elections 2024. Under EMPS, the government had outlaid Rs 500 crore for electric two-wheelers and three-wheelers, which was considerably less than FAME 2. Naturally, the subsidies per vehicle came down, increasing the final cost for the end consumers. This directly resulted in a drop in electric two-wheeler sales in April. 

The subsidy for electric two wheelers is set to Rs 5000 per kWh of battery capacity and capped at 15 percent of the vehicle’s ex-showroom price.There’s an additional cap of Rs 10,000 per vehicle. There are three main criteria to qualify for EMPS subsidies: the vehicle has to be manufactured in India, EV makers have to localise manufacturing and assembly of certain parts like the batteries, and instrument console, and the vehicle warranty has to be a minimum of three years or 20,000 km (whichever comes first). To help reduce the final purchase costs, some electric two wheeler manufacturers started offering discounts on their ex-showroom prices to help soften the blow.

What’s In The Future

FAME 3 will come into effect within 100 days of the General Election results, when the new government is set, so around September 2024. While the qualification criteria are being worked on, they are reported to be the same as FAME 2. Even the allocation of Rs 10,000 crore is the same as the earlier edition of FAME. This should more likely bring down the prices of electric scooters and bikes as compared to pricing with EMPS. However, manufacturers seeking subsidies under FAME 3 would have to re-apply for certification.We also know that FAME 3 will be valid for sales made over two years, instead of five years under FAME 2.

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The period for which FAME 3 will be applicable will allow EV manufacturers to streamline their manufacturing and logistics to a point where they would no longer have to rely on subsidies to make their vehicles affordable for the masses. This will allow them time to get one step closer to localisation of all the components. Many manufacturers like Ola Electric, TVS, Bajaj, Tork Motors, Ather Energy, and Hop Electric have already begun taking steps towards being independent of subsidies, when the subsidies will eventually be withdrawn completely. Until then, FAME 3 will provide relief to manufacturers as well as consumers who don’t have to worry about the high costs of buying an electric scooter or bike in India.

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