Small E-Bike OEMs Are Shutting Shops Over FAME-II Violations

Electric two-wheeler sales are increasing in India however only a select few manufacturers are pushing this growth. New players have lost quite the traction in this segment, which was the norm two to three years before, and in its place are legacy players dominating proceedings. Reports state that the concentration of the majority of e2W sales amongst a handful of manufacturers has been due to the disappearance of small, new players from the market. Hero Electric, which was once a market leader, is now undergoing insolvency proceedings as the company has gone bankrupt. 

Why Are New Players Vanishing?

Most of these small companies were penalised for violating Faster Adoption and Manufacturing of Electric Vehicles – II (FAME-II) subsidy norms. This came to the fore when the Government of India began investigating multiple companies over complaints on non-compliance between 2022 to 2024. A total of 13 companies including the likes of Okinawa Autotech, Hero Electric, Benling India, Greaves Electric Mobility, etc, came under flak for violating Phased Manufacturing Programme (PMP) localisation norms under FAME-II. These companies were directed to return subsidies with the total clawback estimated at ₹469 crore. 

In December 2024, the Serious Fraud Investigation Office (SFIO) also found via an investigation that Hero Electric, Benling India, and Okinawa Autotech had falsified documents to show compliance. The total amount these companies scored via this malpractice was to the tune of ₹297 crore. Post the investigation, a lot of them had to stall production to gather the penalty amount. Plus due to the loss of subsidies, their products also became expensive which in turn dented consumer demand, which finally led to the collapse in sales at these firms. 

Legacy OEMs And Their Trump Card

These made the playing field ideal for legacy manufacturers like Bajaj Auto and TVS Motor Company to grow. Both the companies further strengthened their extensive supply chain and dealership networks. Coupled with their credibility image, both started leading the electric two-wheeler segment. 

While Ola Electric continues to face increased regulatory scrutiny and a decline in market share, the brand continues to expand its portfolio and production scale aggressively. 

On the other hand, Ather Energy which recently went public has quite the exciting future ahead. The brand has both new electric scooters and motorcycles slated for production next. Plus the newly raised public money will further help the brand expand its manufacturing prowess, and look forward to potential opportunities overseas as well. 

What Happened After FAME-II?

FAME-II has been temporarily replaced by the PM E-Drive subsidy scheme with a capital outlay of ₹10,900 crore spread across two fiscal years. Wherein ₹5047 crore has been allocated for FY 24-25 and ₹5,853 crore for FY 25-26. Post that, the Government is working on a new successor programme that will be referred to as FAME-III. It will also be aimed at promoting electric mobility while ensuring stricter compliance and a strong focus towards encouraging domestic manufacturing.

(Source: The ETAuto)