A recent report highlights that the reduction in government subsidies under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme has dampened the demand for electric two-wheelers.
The report emphasizes that manufacturers must now concentrate on slashing prices through research and development (R&D) and innovation, in contrast to relying on subsidies.
The mid-term sales trajectory for two-wheelers, including electric ones, is predicted to be modest, influenced by uncertainties and several factors.
The CARE Ratings’ report states that core segments of two-wheelers, specifically motorcycles in the 75 cc – 110 cc range and scooters in the 75 cc – 125 cc range, experienced significant sales volume declines from FY19 to FY22, with a marginal recovery noted in FY23.
Electric two-wheeler sales also declined substantially in Q1 FY24 due to the withholding of FAME subsidies for certain Original Equipment Manufacturers (OEMs).
The reduction of subsidies from INR 15,000 per kWh to INR 10,000 per kWh, along with a decrease from 40% to 15% of the ex-factory price, contributes to the uncertainty in the electric two-wheeler market.
Manufacturers are urged to shift their focus from government support to achieving price reduction through R&D and innovation. Previously, the FAME subsidy scheme was introduced in April 2015 to enhance EV sales, with the budget increased annually.
In April 2020, it was replaced by the FAME II scheme with a significant budget of INR 10,000 crore and extended till March 2024. Despite state incentives, the recent reduction in central government subsidies has impacted electric two-wheeler sales.
Sudarshan Shreenivas, Director at CARE Ratings, noted that technological advancements reducing battery costs to match internal combustion engine (ICE) vehicle prices would be the driving factor for electric two-wheeler sales in the long term.
He also highlighted the potential impact of interoperability standards for EV batteries, which could boost e-two-wheeler sales due to the convenience of swapping spent batteries at charging stations.
