The Society of Manufacturers of Electric Vehicles (SMEV) has urged the government to establish a fund worth Rs 3,000 crore to revive and sustain the operations of Original Equipment Manufacturers (OEMs) in the electric vehicle sector.
The recent suspension of subsidies under the FAME scheme has severely impacted the industry, with outstanding subsidies exceeding Rs 1,200 crore, causing financial distress for over 18 months.
SMEV emphasizes that this subsidy blockade, along with pending claims and restrictions on future sales, has had a devastating impact on startups and early adopters in the electric two-wheeler segment.
To mitigate the situation, SMEV proposes the establishment of a Rehabilitation Fund, supported by the Ministry of Finance, to assist affected companies in sustaining their operations for at least the next one to two years.
The collapse of the subsidy scheme has not only affected operations and sales but has also put pressure on dealerships and caused cancellations of customer bookings. The total impact, including lost man-days, market share depletion, and reputational damage, is estimated to exceed Rs 30,000 crore.
The investor community has also been discouraged from investing in the sector due to adverse actions against OEMs. Banks are reluctant to provide credit, resulting in loan repayment challenges.
SMEV suggests working closely with the Finance Ministry to define the fund’s structure, which could involve grants or subvention schemes as guarantee mechanisms for lenders, monitored by a committee.
SMEV believes that implementing such a fund would not only rescue highly stressed EV companies but also demonstrate the government’s commitment to its national e-Mobility charter, positively influencing the global investor community.
The Ministry of Heavy Industries has reduced the cap on incentives for electric two-wheelers from 40% to 15% of the ex-factory price, further impacting the industry. The FAME India scheme, which began on April 1, 2019, for a three-year period, was extended until March 31, 2024.
