Revised FAME II Scheme To Boost Demand For Electric Two-Wheelers

The government's revised incentives for FAME II (Faster Adoption and Manufacturing of Electric Vehicles in India) scheme has increased subsidies for electric two-wheelers. And this subsidy is expected to significantly reduce the price gap between electric two-wheelers and internal combustion engine (ICE)-based commuter two-wheelers. The higher subsidy announced in the revised incentives will reduce the initial cost of ownership by a minimum of 10-12 per cent. While electric two-wheeler penetration levels are currently still low, this could improve by at least 8-10 per cent going ahead, due to reducing EV prices. The commuter segment in particular, could see more adoption of electric two-wheelers going forward, say observers.

Also Read: EV Makers Welcome FAME II Subsidy Revision

Premium electric scooters like the Ather 450 X and Chetak electric will become more affordable and offer a superb alternative to leading internal combustion engine scooters

"The revised FAME II policy is expected to push up demand for electric two-wheelers, considering the segment witnessed a dip in FY 21. While the pandemic has put hurdles in the way, the revised scheme is expected to help grow demand. This is primarily due to the price factor, which will be lower in relation to ICE two-wheelers. Secondly, the revised scheme and effect on prices on electric two-wheelers, should also help customers with a viable choice since the fuel prices have also hit the roof. And customers would be able to see the advantage of owning a clean energy vehicle for a longer term with maintenance costs also being low," said Sridhar V, Partner, Grant Thornton Bharat LLP.

Also Read: Electric Two-Wheelers To Get More Affordable As Govt Amends FAME II Subsidies

Mainstream two-wheeler OEMs are also dabbling in electric two-wheelers, and the segment is set to see increased growth in the next 3-4 years

Naturally, both electric vehicle manufacturers, as well as traditional two-wheeler manufacturers who have presence in the electric segment, welcome the move. EV manufacturers like Ather Energy believe the revised scheme will give significant boost to the sector, while two-wheeler majors like TVS Motor Company believe investments in electric mobility will be important for future, and the latest incentives will increase penetration.

"The revision in the FAME policy, increasing the subsidy by 50% per KWh is a phenomenal move. Sales of electric two wheelers have grown despite the pandemic and with this additional subsidy, we expect electric two wheeler sales to disrupt the market, and clock 6 million+ units by 2025. Ather Energy already has plans to expand distribution to 30 cities in the next 6 months and this increased subsidy will help accelerate consumer demand, immensely. The Government's continued support to drive adoption of EVs, with a keen focus on locally built electric two wheelers will make India the manufacturing hub of EVs," said Tarun Mehta, CEO and Co-Founder, Ather Energy.

"We welcome the government's continued support to EVs. Sustainable mobility solutions are very important for the future and TVS is investing significantly behind this. The improved incentives for electric two-wheelers will increase penetration. Such policy direction should lead to indigenous development of future technology," said Sudarshan Venu, Joint Managing Director, TVS Motor Company.

According to the Society of Manufacturers of Electric Vehicles (SMEV), the electric two-wheeler segment has been growing steadily over the years. In FY 2015-16, the electric 2W sales accounted for just 20,000 units, which has grown to 1,52,000 units in FY 2019-20. According to the SMEV, electric two-wheelers offer savings of over Rs. 80,000 over a 5-year period compared to internal combustion scooters and commuter bikes. With petrol prices at all-time highs, observers say there will be more demand for the electric commuter segment, with consumers switching to electric two-wheelers in the next few years.