Indian Government Unlikely to Extend FAME-II Beyond March 2024.

The subsidy for electric two-wheelers is expected to end in a few weeks. The government is hesitating to introduce the third phase of the FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India) scheme. Despite opposition from the finance ministry and a previous reduction in subsidies, recent stabilisation in demand may lead to subsidies for around 10 lakh e-2-wheelers under FAME II.

Reduction in subsidies earlier this year had initially led to a decline in demand for electric two-wheelers. However, recent stabilisation in demand has sparked discussions among officials who argue that the economic advantages of cleaner-fuel vehicles will drive a natural transition, even with higher initial costs.

Tarun Mehta, CEO of Ather Energy, and Kapil Shelke, Founder and CEO of TORK Motors, have shared their insights on the potential repercussions.

Tarun acknowledged FAME-II's role in catalysing industry growth. He said, "I think FAME-II has done a good job. Though we have had a fair bit of shock this year, I think FAME-II still helped the industry grow 4-5 times in a very short span." He stressed the need for a gradual tapering down of subsidies to maintain momentum, stating, "If FAME-II ends and if there is no FAME-III, we run the risk of seeing another year of flat to limited growth."

Speaking about the phaseout, Kapil said, "With the FAME-II advantage gone, this will have a direct impact on the R&D efforts, since it will always be easier to import technology and assemble in India. We're risking a hoard of cheap imported products, especially from China, flooding the market and creating a price disadvantage for OEMs in the country."

Commenting on the same, Mr. Hyder Khan, CEO, Godawari Electric Motors said, " While the withdrawal of FAME-II subsidies may pose a temporary setback to the electric vehicle industry, it also serves as a catalyst for innovation and market resilience. The impact is not merely a reduction in financial incentives but an invitation for the industry to mature, optimize costs, and accelerate the development of sustainable solutions. It could be the impetus for the electric vehicle sector to emerge stronger, more competitive, and truly sustainable in the long run."

2024 will thus be an interesting year for electric vehicles as a whole. We intend to see how exactly the industry shapes up for the challenge and just how the buyers respond to the lack of subsidies.