Electric 2-wheeler to become cheaper with higher incentives under FAME II

While some electric two-wheeler makers have already reduced the prices of their models, others will be doing the same in the next few days, following an increase in incentives under the second phase of FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme by the government. Manufacturers said the higher incentives would encourage them to reduce prices and bring down the initial acquisition cost for buyers, thereby speeding up adoption of e-two wheelers.

The government had on Friday made a partial modification of the scheme for FAME in India Phase-II), such as increasing the demand incentive for electric two-wheelers to Rs 15,000 per KWh from the earlier uniform subsidy of Rs 10,000 per KWh for all EVs, including plug in hybrids and strong hybrids except buses. In the latest modification, the department of heavy industries also capped sops for electric two-wheelers at 40 per cent of vehicle cost, up from 20 per cent earlier.

Depending on the model and the variant, some manufacturers, including Ather Energy and Hero Electric have cut prices by Rs 15,000-28,000; others will announce price cuts this week. The price reduction reduces the price gap between an e-two wheeler and internal combustion engine (ICE) powered ones, though the latter remains cheaper.  

Take Ather Energy’s 450x for instance: After the recent incentives, the exclusive showroom price of the model in Delhi has come down to Rs 1,32,426 from Rs 1,46,926. Honda Activa 125cc, the comparable ICE model to the 450x costs Rs 97,723. However, when compared to some low-selling, niche models like a Vespa SXL 125 which costs Rs 1,17,000 to Rs 1,22,000 (ex-showroom, Delhi)  the new prices have come on par.  

“The move allows us to launch more scooters at lower price points (sub Rs100,000 now). Also, the gap is narrower when you compare on-road prices, which is what customers actually pay (not ex-showroom prices),” said Tarun Mehta, co-founder and CEO at Ather Energy.

The higher incentives and the subsequent price reduction makes EVs a lot more affordable and brings them into the consideration set of a larger number of buyers, particularly those who so far have shied away from it due to its high acquisition costs. It comes at a time when petrol prices have reached Rs 100 a litre. This too will lead to a faster adoption of e-two wheelers, he said.

“It eliminates the upfront delta between a petrol and EV scooter completely,” says Mehta. According to him, it pulls back the timeline on electrification on EVs by a few years, with this. It will happen now, instead of three years later. Sales of electric two-wheelers have grown despite the pandemic and with this additional subsidy, he expects electric two-wheeler sales to disrupt the market, and clock 6 million-plus units by 2025.

India sold a total of 143,821 electric two-wheelers in FY21, a decline of 6 per cent year-on-year, according to the Society of Manufacturers of Electric Vehicles (SMEV).

Emboldened, Hero Moto-Corp backed Ather, now plans to ramp up distribution at an accelerated pace and reach 100 cities against the earlier plan of 30. It is also looking to advance capacity expansion plans by six to nine months. “The place in Hosur we have taken allows us a 3x expansion,” he said.

Rakesh Sharma, executive director at Bajaj Auto lauded the government’s move pointing out that it shows the government's commitment towards EVs and put concerns to rest. However, Sharma isn’t as enthusiastic as Mehta. “While this is helpful, it will not change the dynamics. That will occur only when the battery cost comes down,” he said. Bajaj will take a call on the price cut on the e-Chetak in the coming days, he said.

Sudarshan Venu, Joint Managing Director, TVS Motor said, sustainable mobility solutions are very important for the future and TVS is investing significantly behind this. “The improved incentives for electric two wheelers will increase penetration and encourage further indigenous investments in future technology.”  

The latest step will take care of one of the biggest blockades of the high sticker price of e-two wheelers,” said Sohinder Gill, Director General, SMEV.

 A city speed electric scooter will now cost less than Rs60,000 and a high-speed scooter with a range of 80 km will come nearer to the price tag of Rs.100,000. Together with the other important factors like extremely low running cost, low maintenance and zero emission, such price levels will surely spur a substantial demand for electric two wheelers, said Gill.

“We believe the time has come for mass adoption of electric two wheelers and such initiatives coupled with a mass awareness campaign by the government and easy terms financing by public sector banks will bring us closer to the target of 30 per cent of the two-wheeler market becoming electric in 5 years,” said Gill.

Hero Electric, has passed on the benefits fully and reduced the prices ranging from Rs8000 to Rs28000. Other manufacturers too have similar plans. Based on models, Okinawa Autotech plans to reduce the price from Rs7500 to Rs15000, said Jeetender Sharma, MD and Founder Okinawa Autotech. “This new revision to the FAME II scheme is an important step in creating an ecosystem for EV mobility,” he said.

Consultancy McKinsey estimates India’s e-two-wheeler market to hit 4.5-5 million in the 2025 financial year, accounting for 25-30 per cent of the total market, and nine million by 2030 (around 40 per cent of the total market).

  •   Most companies to pass on the benefits to buyers
  •   E-two-wheeler makers say higher incentive to reduce price gap with petrol 2-wheelers
  •   Ather Energy now plans to accelerated distribution and capacity expansion
  •   The move to take us closer to 30% target in 5 years: EV apex body

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