FAME 2 Subsidy Reduction: Reactions From EV Brands And Public

The Central Government had allocated Rs 10,000 crore for FAME 2 (Faster Adoption and Manufacturing of (hybrid &) Electric vehicles Phase II) but with growing electric bike and electric scooter sales, those funds have almost run dry. In a bid to prevent the subsidy from being completely halted, the government pumped in an additional Rs 2,000 crore, and now, the subsidy will continue albeit at a much lower rate from June 1, 2023. This will result in the prices of FAME 2 compliant electric two-wheelers to go up considerably. You can read more details about it here. Consequently, the industry as well as the general public have reacted to this move, and here’s what they think:

Tork Motors:

Kapil Shelke, the CEO and founder of Tork Motors, well known for their Tork Kratos electric bike has welcomed the move. He says, “The revised FAME-II subsidy slab by the government is a step in the direction taken by several nations as markets for EVs start to begin their maturing phase. While penetration of EVs are still much below the desired 10%, it will also allow for the manufacturing ecosystem to gear up for the new reality. For us at TORK Motors, we have focussed our efforts on providing our customers with a great product and ecosystem experience, to provide high levels of customer delight and satisfaction and will continue to stay on this path, irrespective of subsidy slab changes." 

Ather Energy:

Tarun Mehta, the Co-founder and CEO of Ather Energy, the maker of the popular Ather 450X, was also in support of the move. The statistics in his tweet shows the journey of the Indian electric bike and electric scooter segment:

We live in the most roller coaster of an industry😁

2019 - subsidy goes 🔼 to 30K
2021 - subsidy goes ⏫ to 60K
2023 - subsidy goes 🔻to 22K

What goes up, must come down.
The industry must stand on its own feet very soon. https://t.co/jH39dUGmjB

— Tarun Mehta (@tarunsmehta) May 21, 2023

Okinawa:

A spokesperson from Okinawa, one of the most popular EV makers, especially in the low-speed and affordable high-speed electric scooter segment said, “The customer price will increase to the extent of any reduction in the subsidy value. There might be a near-term impact on the overall industry volumes, however, it is the right step for the industry to become self-reliant. We have prepared for a no-subsidy regime over the next year.”

Hop Electric Mobility:

Another EV startup, Hop Electric Mobility, which launched the Hop Oxo, its first electric bike last year, has also welcomed the move. Nikhil Bhatia, Co-Founder & Chief Operating Officer of Hop Electric Mobility said, "There was a need to have a more pragmatic approach to the long-term advancement and sustenance of the electric vehicle segment. Phasing out the subsidies is a forward looking move, and it’s time now that the dependence on subsidies is done-away-with gradually. Subsidies are no longer needed for the electric two-wheeler industry to thrive, and reducing and eventually removing FAME II subsidy is a welcome step in the right direction."

He continued, "It is time EV stands on its own and we are ready for it."

Simple Energy:

We got to talk about this to the folks from Simple Energy when it launched its first electric scooter, the Simple One. The spokesperson said, “When we talk about the FAME 2 subsidy, the government has reduced it significantly, but I believe any of the businesses that need to be built, not just the electric vehicle industry or any industry, it has to be built independent of subsidies, right? Today, tomorrow, maybe some day or the other the subsidy would have gone up. It’s just that people need to tighten their belts and get ready that the subsidies will go away, and work towards that optimisation of engineering, costs, and all the components to ensure that they are making a product that is viable for the market, and that is what we also are doing”.

When asked about the challenges from a customer standpoint, especially with the brand’s perception of being new and a yet-to-be-established EV maker, he said, “The customer looks at the total acquisition cost. Of course, the upfront cost has gone up, but from a consumer perspective -- the consumer is very smart. He looks at all aspects - he looks at how much (he’ll) be spending in the next five years also, right? Even if I, as a consumer, go out and buy anything, I look at the total acquisition cost. And that is where electric vehicles win. And we, Simple Energy, also, when we compare with any of the ICE competitors that are there, the five-year running cost of an ICE-engined scooter would be…in fact, five years of our scooter being run would be lesser than even one year of ICE-engined scooter being run on the road. So that is where the consumers see and understand, and then take decisions.”

Even though the sharp rise in prices will impact sales, manufacturers seem to have welcomed the move as it will be beneficial in the long term. This will also streamline the supply chain, and will encourage EV makers to design and develop products that are affordable enough, despite not being dependent on external subsidies. However, customers seem to have a different reaction as it directly affects their buying power. Check out what 345 respondents in our Instagram poll have voted:

The public sentiments have been the same on Twitter as well:

FAME 2 (Faster Adoption and Manufacturing of Electric Vehicles) has helped massively in electric 2w sales in India. But since the capital set aside for the same is running dry, the Central Govt has decided to reduce the subsidy from June 1. What are your thoughts? #fame2 #ev

— ZigWheels (@Zigwheels) May 23, 2023

It is clear from the polls that customers want the subsidies to remain the same. That’s only fair as the current cap in FAME 2 subsidies were supposed to be valid till March 31, 2024. As per their opinion, the government could’ve pumped in more than the Rs 2000 crore to keep the subsidy going at least until the proposed deadline. That would’ve helped customers to make their purchase before the beginning of the next financial year. Prices generally go up due to inflation at the beginning of every financial year, so keeping the subsidy intact until then would’ve helped prospective customers to save up quite a bit.

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That said, reducing the subsidy is the right way to go in our opinion as it cushions the impact as compared to removing them altogether. This will also give enough lead time for manufacturers to come up with optimised strategies for their existing products apart from designing and developing more affordable electric vehicles in the country.