[TusharK]

According to a media report, the government of India is likely to scrap the FAME II scheme after the next fiscal year.



FAME, which stands for Faster Adoption and Manufacturing of Electric Vehicles in India, was introduced to facilitate the transition to EVs. It is said that going forward, the government might offer incentives to EV makers through the production-linked incentive (PLI) programme.

Under FAME II, companies can offer discounts of up to 40% on the cost of locally manufactured vehicles and claim it as a subsidy from the government. However, there have been reports of misappropriation of subsidies by certain EV makers, which are still being investigated. Perhaps this forced the policymakers to give the FAME II scheme a second thought.

The PLI scheme covers advanced chemical cell (ACC) battery storage, automobiles and auto components. Benefits under this scheme will be accrued at the manufacturers’ end. In contrast, the subsidy is disbursed at the point of sale of the vehicle under FAME II.

Source: ET Auto

Link to Team-BHP News

[doctorjee]

Originally Posted by TusharK

According to a media report, the government of India is likely to scrap the FAME II scheme after the next fiscal year.
======
Link to Team-BHP News

Companies are bound to misappropriate all funds and subsidies. That's how they function. For faster adoption of EVs the government should pass the benefits directly to the consumers and in a long termed manner.

They could have included the following
1. Cheaper electricity rates (fixed lower rates for over 5 years or till they keep the EV), as well as partial refunds on Highway chargers for 2-3 years
2. All parking and toll charges waiver
3. Insurance subsidy by upto 20k every year for 5 years
4. Continue the income tax benefits of interest subsidy for the entire duration of car loan.
5. Initial tax waivers to continue.

All these must must must be accompanied enforcing shift to green energy production by the companies.

If they stop incentives at this stage it will hurt the EV prospects very badly.

[Contrapunto]

Originally Posted by doctorjee

For faster adoption of EVs the government should pass the benefits directly to the consumers and in a long termed manner.

If they stop incentives at this stage it will hurt the EV prospects very badly.

Totally agree. Stimulating demand is a far better use of government funds than wasteful subsidy. Manufacturers are happy to take the subsidy, but consumers rarely benefit. I think the proposed "production led incentive" will not fare much better. Similar to yours in many respects, IMO some of the incentives the government can think of are

1. Income tax rebate on EV loans- this is leak proof and should be committed for the next xx yrs to create certainty for the consumers
2. Minmum GST rate for EV ecosystem (car, chargers, CPO equipment etc) committed for xxx years
3. Continue "aggregating demand" across state transport corporations and city transport authorities for public transport vehicles
4. Like JNURM and "cash-for-clunkers" invite bids for replacing ALL the India post vans (being done in US right now), government departmental cars, municipal vehicles, garbage collection vehicles etc. This will automatically give lower pricing from the sheer size of the order without any need for subsidy to anyone. Let the commercial risks be borne by the sellers in lieu of large volumes
5. Provide a "public option" for charging infrastructure similar to UPI. Let REC, NHAI or a similar entity take the lead. This is especially needed for "thin" routes in sparsely populated parts of the country. This is subsidy and will be well spent. Maybe, in parallel, replicate the PCO revolution from Rajiv Gandhi era- but for CPO operations.

[sri_tesla]

Originally Posted by doctorjee

Companies are bound to misappropriate all funds and subsidies. That's how they function. For faster adoption of EVs the government should pass the benefits directly to the consumers and in a long termed manner.

FAME II is always supposed to end in March 2024. It was launched in 2019 with a 3 years timeline (till March 2022) with a budget outlay of Rs 10,000 crore, to support 7,000 e-buses, 5,00,000 e-three-wheelers, 55,000 e-passenger vehicles, and 1 million electric 2-wheelers. It was extended by another 2 years till March 2024. As per the latest numbers (Feb 15th, 2023), there are already 800K electric 2-wheelers subsidized and only 200K more remaining. Based on the current monthly sales rate, it will take another 3 to 4 months to reach the 1 million limit which is well before March 2024. Similar limits on 3-wheelers and buses are also expected to be reached before 2024.

For electric buses, the govt is already going by the mass tendering route to get the best prices. It's already working better than any subsidies. The operating costs in the latest such tenders are already lower than diesel buses.

In my opinion, FAME II already did its job in helping companies to improve margins on electric vehicles. Most companies are artificially keeping ex-showroom prices high because of these subsidies. Ather 450, and Bajaj Chetak were actually launched at much lower prices initially even with lower subsidy amounts (Rs 10K per kWh battery capacity vs Rs 15K now) at that time. Now that most of them (Ola, Ather, TVS, Bajaj) have set up huge factories, they are already competing with discounts, offers, and price reductions. There will definitely be lower sales initially after the end of subsidies but I believe they will be growing sooner than later due to competition.

Also, the biggest factor in lower prices for EVs is lower GST (5% vs 29 to 50% for ICE 2-wheelers and cars) and road tax waivers by many states. I believe this will continue for a few more years even after the FAME II subsidy expires.

[fhdowntheline]

I think Govt should extend the FAME subsidy for at least 3 more years, or until say, the EV sales momentum reaches a critical point, and it becomes a sizeable chunk of the automotive market, like 20 % of the 4-wheeler sales for example.

[antz.bin]

EV 2 wheelers sales momentum has crossed the technology adoption chasm of 5% market share. Vehicles like the Ola S1 Air are already threatening to bring down the likes of the Activa on all performance and price metrics if only they can make them reliable enough and in enough numbers. I understand this situation is with a subsidy at play but the difference is not insurmountable. For a long long time, I have maintained that scooters should not have petrol engines powering them. The situation right now is that Petrol is the inferior option for most use cases even if we pick the Jupiter and the iQube from the same showroom.

EV 4 wheelers have only reached 1.5% market share so there is still catching up to do till we get to the magical 5% mark. Subsidy is required for 4W EVs to catch up but the other measures like PLI and much lower GST slab are helping too. We havent seen an EV from Tata in the 4+m segment. The only Made in India 4+m EV is the Mahindra XUV400 and it sent shockwaves down Tata's spine on the day of its launch.

That is the segment that stands to gain the most w.r.t. GST benefit (5% vs 43/45/48/50%). Even with just CKD operations, the ZS EV does 50% of the numbers of its sibling, the made in India Astor. The change will be massive if cars like the ZS EV, Kona, Atto 3, Ioniq 5 etc. start getting Made in India. If the foreigners won't do it, the indigenous manufacturers have to show the way here.

[doctorjee]

Originally Posted by Contrapunto

Totally agree. Stimulating demand is a far better use of government funds than wasteful subsidy. Manufacturers are happy to take the subsidy, but consumers rarely benefit. I think the proposed "production led incentive" will not fare much better. Similar to yours in many respects, IMO some of the incentives the government can think of are

1. Income tax rebate on EV loans- this is leak proof and should be committed for the next xx yrs to create certainty for the consumers
2. Minmum GST rate for EV ecosystem (car, chargers, CPO equipment etc) committed for xxx years
3. Continue "aggregating demand" across state transport corporations and city transport authorities for public transport vehicles
4. Like JNURM and "cash-for-clunkers" invite bids for replacing ALL the India post vans (being done in US right now), government departmental cars, municipal vehicles, garbage collection vehicles etc. This will automatically give lower pricing from the sheer size of the order without any need for subsidy to anyone. Let the commercial risks be borne by the sellers in lieu of large volumes
5. Provide a "public option" for charging infrastructure similar to UPI. Let REC, NHAI or a similar entity take the lead. This is especially needed for "thin" routes in sparsely populated parts of the country. This is subsidy and will be well spent. Maybe, in parallel, replicate the PCO revolution from Rajiv Gandhi era- but for CPO operations.

I really like all your ideas. Especially the idea of a unified charging payment system (like UPI) may be very helpful, as this charger fragmentation is turning out to be a real PITA for all EV owners. 30 companies setting up 30 different types of chargers with 30 different apps and 30 different wallets, none talking to each other. Right now I got ~1-1.5k stuck in 3 or 4 wallets. A unified app with a unified payment system will help a lot. The companies can keep rates different.

Also, the government should formulate FAME-like policies, not for a certain period but keeping the outcome in mind. Let us take China for example, they had an EV policy (which came into effect after India's policy was proposed during the previous govt), and they stopped most of the incentives only after they achieved a certain target, that is ~25% of all new car sales should be EVs. This momentum will help them achieve a state where there will be more EVs than ICE in China by 2030. If we take that as a fair target, we are nowhere close to that. Forget 4W, even in the 2W market only 5% of new 2Ws sold are electric.

The government really needs to think really hard and innovatively, about this 1-2L subsidy, etc., those may only help ppl who would be purchasing EVs anyway. I decided to buy an EV based on EV merits and govt subsidies played no role whatsoever. Yeah, it was good to have 1.5L back in my account later. No one buys an expensive item just because they got a 5% discount voucher!
NO ONE will be (or should be) compelled to buy an EV just because there is a 1L subsidy on a car that is already 5L Rs more expensive. This thought itself is naïve.

[neerajku]

This is probably the first time when a subsidy scheme is getting carefully scrutinised for its intended benefits and getting a sunset as promised. Do not remember any such initiative earlier where tax breaks, subsidies continued unabated. Good step and will also ensure that rentiers are careful in their investment plans.
A good suggestions also to stimulate demand, will work both ways however history says that targeted demand stimulation does not work very well if you want to increase production, create jobs and so on. If it were so then the GOI would have just reduced taxes, increased finished goods import duties and waited and watched. Unfortunate it does not work that way. There are many avenues for saved money.

[one-77]

Do the more expensive cars like Hyundai Ioniq 5, Kia EV6, Volvo XC40 Recharge etc qualify for FAME II subsidies?

[fhdowntheline]

How many government vehicles have gone electric/ hybrid ? Let the governments lead by example first. Ask mantrijis to ditch their favorite Fortuners and go with a Nexon or a Tigor. Then they should think of ending the subsidy for common public.

[Voodooblaster]

Good decision by govt

Current lot of subsidies are being gobbled up by OEMs

And reduction in GST rates or road tax rates are craftily stolen by OEMs by increasing the ex showroom price

One of the best way to incentivise EV should be by giving TDS credit for people availing Vehicle Loans say 2% of EMI with an upper cap of 25k for car and 5k for two wheelers per year for 3 years per Aadhar linked PAN

Now TDS credit can be utilised only by a genuine Tax filers . Will incetivise more people to file taxes

And banks should be able to do this only for Auto Loans

[Alive2Drive]

Originally Posted by one-77

Do the more expensive cars like Hyundai Ioniq 5, Kia EV6, Volvo XC40 Recharge etc qualify for FAME II subsidies?

They will not as it is more of a locally built car. All these cars are coming in as CKD or CBU hence no exemption.

[antz.bin]

Originally Posted by one-77

Do the more expensive cars like Hyundai Ioniq 5, Kia EV6, Volvo XC40 Recharge etc qualify for FAME II subsidies?

The following is what Bing Chat tells me:

Originally Posted by Bing

According to web search results, the price criteria for FAME II subsidy depends on the type and battery capacity of the electric vehicle. The subsidy amount is ₹ 15,000 per kWh of battery capacity, with a maximum cap of 40% of the cost of the vehicle. However, there are also some upper limits on the ex-showroom price of eligible vehicles. For example, electric two-wheelers should not exceed ₹ 1.5 lakh and electric four-wheelers should not exceed ₹ 15 lakh.

I think the most expensive car that is eligible for FAME II is the Nexon EV Prime.

[anjan_c2007]

Some EV makers are looking ahead toward doom days and closures as a result of the subsidy cut. The Society of Manufacturers of Electric Vehicles (SMEVs) has on 13/06 filed a petition in the National Green Tribunal (NGT) against the government’s decision of slashing the FAME-II (Faster Adoption of Manufacturing of Electric Vehicles in India) subsidies for electric two-wheelers by 75%, beginning June 1. They say that "several original equipment manufacturers (OEMs) are unable to cope with the financial distress because of the government’s decision to FAME-II subsidy cut, and might shutdown due to lack of working capital, loss of investor and bank support, delay in production timelines and a rapidly vanishing distribution network."

The SMEVs predicts that the EV sector could slip into a freefall as the rising cost of EVs will make the transition from traditional fuel-based vehicles to EVs extremely challenging," the letter says. Last week, SMEVs in a letter to the finance ministry proposed the creation of a ₹3,000 crore rehabilitation fund to revive and sustain operations of OEMs affected by the FAME-II subsidy cut.

They SMEVs also says that this comes at a time when the sales of electric two-wheelers crossed the 1 lakh mark for the first time. In May this year, as many as 1,36,045 units of electric two-wheelers were sold across the country, according to Vahaan Portal.

According to them the government’s decision contradicts the efforts to provide a fundamental right to breathe clean air and provide protection against health hazards caused by pollution.

https://www.fortuneindia.com/enterpr...lls-ngt/113046

That some industries should survive and become solely dependent on government subsidies to sustain is appalling to say the least. These subsidies are appropriated from funds with the exchequer that is taxpayers money.

It's not that subsidies have been done away with. These have only been reduced by 75 % and this figure has shocked SMEVs.

Subsidies cannot be eternal on such goods in a country where 75-80 % of the population is poor. Not all persons can afford two wheeler EV's. The priorities of the government should be betterment of living standards for the poor rather than subsidising motorised vehicles.

And it's shocking that the SMEVs is invoking "clean air" as a fundamental right when they are into a freefall and when we all are aware that 55% of the energy these EV's will consume will be generated from thermal power plants that are fuelled by coal.

It's high time that these two wheeler makers stand on their own feet rather than moving with bowls to beg for subsidies from the government.

And speaking about the government, it rolls out the Persian red carpet for such industries and suddenly removes it, telling them to walk on gravel. If these decisions are sudden and impulsive it's bad for the industry. From Day 1 when subsidies are introduced, the government must bring out a white paper with a timetable for reduction of subsidy stating the date, month and year with quantum (% age) of reduction so that industries don't get such sudden seismic shocks due to earthquakes in the corridors of power.

[volkman10]

Electric two-wheeler sales set to crash by over 60 percent in June 2023.

This follows the significant price hike due to the slashing of the FAME-II subsidy that was implemented from June 1.



Link