FAME II scheme amendments will propel the Indian EV industry in the right direction

In its ongoing endeavour to grow EV adoption and manufacturing in India, the Government of India has come up with several incentive schemes. The recently announced revised FAME 2 is a significant step towards taking the sector to the next level. As per the latest amendment, the demand incentive for electric two-wheelers has been raised to Rs 15,000 per kWh from the earlier uniform subsidy of Rs 10,000 per KWh for all EVs, including plug-in hybrids and strong hybrids, except buses. The revision also increased the capping of incentives for EV two-wheelers at 40 per cent of the cost of vehicles, up from 20 per cent earlier.

The above amendments and the FAME 2 subsidy scheme extension until 2024 are being cheered across the industry. The move will help faster the adoption of environmentally-friendly vehicles. However, the subsidy reduces, or even eliminates, several reasons which make it difficult for potential customers to switch to EVs. As they explore a broad spectrum of EV options rolled out by various OEMs, they realize the actual value of EVs and how a particular EV fits their bill.

Industry growth post FAME 2

According to the available numbers from the Department of Heavy Industry, National Automotive Board (source), the number of EVs sold under vehicles under FAME 2 is 102,115+. The number may seem minuscule compared to the internal combustion engine-based automobile market, it shows a giant leap over the last few years. Moreover, with each progressing day, customers continue to see the value of sustainable mobility.

The other aspect of FAME 2 subsidy is to empower OEMs to present the best replacement of ICE vehicles. As adoption increases and economies of scale kick in, manufacturers will address the major pain points like range anxiety, charging infrastructure, and affordability.

The centre Government efforts complement state governments like Gujarat and Delhi, extending additional subsidies and financial benefits to drive faster EV adoption. Such policy measures will also inspire other states to follow the same. With further incentives, the customers will find it easier to switch to electric vehicles.

Charging infrastructure to pick up

EVs adoption cannot pick up without developing the other aspects of the ecosystem. The government has announced that commercial, public EV charging stations for two-, three- and four-wheelers will be eligible for a 25 per cent capital subsidy on equipment/machinery to bring the charging infrastructure up. The grant is limited to Rs 10 lakh per station and is applicable for the first 250 commercial public EV charging stations. This incentive will trigger investments into supporting the charging infrastructure. As customers see more charging stations and EVs around them, they will have less range anxiety and feel more confident to be part of this transformational journey.

The road ahead is greener and cleaner

With the growing awareness and interest in the EV segment, we know that the future for this industry is promising. The amendment to the FAME 2 scheme will help the industry scale to the next level. Moreover, the industry would also need more support in terms of infrastructural development and empowering the stakeholders by creating a supportive policy regime.

Author: Jeetender Sharma MD & Founder, Okinawa Autotech