By: Suhas Rajkumar, Founder & CEO, Simple Energy
The Indian electric two-wheeler market is experiencing unprecedented growth as consumers become more aware of the numerous advantages of owning electric vehicles. India is positioned to be one of the world’s largest markets for two-wheelers. Hence, the Indian government has also been making substantial efforts to encourage their use as part of its attempts to reduce pollution and dependency on fossil fuels.
The Phase 2 of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme introduced in 2019 was an ambitious initiative by Government of India enabling the EV ecosystem to grow. Furthermore, this scheme supported the rapid electrification of public and personal mobility options, including electric two-wheelers, by offering a host of incentives.
Under the Phase 2 scheme, customers enjoyed various advantages such as access to financial incentives in the form of subsidies for purchasing electric two-wheelers. The subsidies helped reduce the cost of purchasing such vehicles making them a viable option for customers. Additionally, the initiative encouraged greater energy efficiency, a longer battery life, and provided the much-needed boost to the localized manufacturing of electric two-wheelers with enhanced range and performance.
Come 2023, the Government revised some of the key initiatives under FAME-II, which include the lowering of the subsidy amount for electric 2-wheelers, ahead of the March 31, 2024 deadline. The revision of the subsidy amount would lead to an impact on the overall sales of electric 2-wheelers in India and various stakeholders, such as the manufacturers and the customers.
Impact on customers
The primary purpose of the subsidies was to enable customers to take advantage of several perks when buying an electric two-wheeler, such as offering a subsidy of up to Rs. 20,000. The impact of the announcement, however, would result in an increase in the cost of electric two-wheelers. There are also legitimate concerns expressed about how the affordability of electric two-wheelers will change after the subsidy is cut, as it is a critical consideration in customers’ decision-making.
Impact on the industry and environment
With the overarching goal of making India a significant EV hub, the FAME-II subsidy was created to benefit not only customers but also incentivize electric car manufacturers and suppliers. The elimination of the subsidy, however, may have effects on the entire electric vehicle market. Customer demand and market penetration are key factors in the industry’s growth and development. Lower subsidies might cause the market to grow more slowly, which would have an adverse impact on manufacturers, dealers, and the entire ecosystem that supports electric mobility.
Electric two-wheelers serve as a credible form of green mobility that helps to minimize emissions of greenhouse gases and pollutants. Access to these environmentally efficient vehicles will be restricted as a result of the reduction of subsidies. Due to the higher prices, customers who are interested in adopting greener transport solutions may encounter numerous setbacks, which may limit their ability to contribute to a cleaner environment and would push them to purchase ICE two-wheelers instead.
Outlook
Customers in India will increasingly adopt electric two-wheelers for their daily commuting for the various benefits it offers. Manufacturers have been offering a variety of models that cater to every kind of customer. Therefore, if the market has to realize its full potential, manufacturers will need to take cognizance of the situation and re-wire their strategies so that an equilibrium is maintained between their profitability as well as customers’ expectations for affordable mobility solutions.
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