The Faster Adoption and Manufacturing of Electric Vehicles (FAME) 2 Subsidy Scheme is a government initiative aimed at boosting the adoption of electric vehicles (EVs) in India. This scheme provides financial incentives primarily for electric two-wheelers (e-2Ws), encouraging consumers to shift towards sustainable transportation.
Recently, the government revised the subsidy amount for electric two-wheelers. The subsidy was reduced from ₹15,000 per kWh to ₹10,000 per kWh. Furthermore, the incentives on e-2Ws are now capped at 15% of the ex-factory price, a significant decrease from the previous 40%. These adjustments have led to increased prices for electric two-wheelers.
The adjustments to the FAME 2 subsidy scheme have had a pronounced effect on the electric two-wheeler industry. Following the subsidy reduction, sales of e-2Ws declined notably, as the increased prices deterred customers. Leading companies in the sector reported sharp drops in their sales figures.
Major players like Hero Electric and Okinawa AutoTech faced significant sales declines due to the subsidy changes. For instance, Hero Electric's sales in July 2023 were merely one-tenth of its average monthly sales in the previous year.
The reduction in sales poses a challenge for the industry’s goal of selling 1 million electric two-wheelers within a year. In FY23, the industry only managed to achieve 71% of this target as set by the NITI Aayog.
The ability of the industry to meet the ambitious sales target will depend on several factors. These include the efforts of original equipment manufacturers (OEMs) to reduce vehicle costs through innovative engineering, vendor discounts, and the introduction of more affordable EV models.
Some OEMs are considering vehicles with lower battery packs to cut costs. While this strategy could make EVs more affordable, it may also affect their performance and range due to fewer battery cells powering the vehicle.
Industry experts maintain an optimistic outlook for the latter half of the year, especially during the festive season. Companies are strategizing to take advantage of expected strong market demand. The continuous adoption of EVs and technological advancements are expected to drive OEMs to innovate and offer more competitive pricing.
Despite recent challenges, industry experts believe that sales trends will improve. They are hopeful that with sustained efforts and growing consumer interest, the ambitious target of selling 1 million electric two-wheelers will eventually be realized.
Q1. What is the FAME 2 Subsidy Scheme?
Answer: The FAME 2 Subsidy Scheme is an initiative by the Indian government that aims to promote the adoption of electric vehicles by providing financial incentives, particularly for electric two-wheelers.
Q2. What recent changes were made to the FAME 2 Subsidy Scheme?
Answer: The subsidy for electric two-wheelers was reduced from ₹15,000 to ₹10,000 per kWh, and incentives were capped at 15% of the ex-factory price, down from 40%.
Q3. How did subsidy changes impact electric two-wheeler sales?
Answer: The changes led to increased prices for electric two-wheelers, resulting in a significant decline in sales as consumer demand was affected by higher costs.
Q4. Which companies were significantly impacted by the subsidy changes?
Answer: Companies like Hero Electric and Okinawa AutoTech faced dramatic drops in sales, with Hero Electric’s July 2023 sales hitting just one-tenth of its average monthly sales from 2022.
Q5. What factors will influence the achievement of the 1 million sales target?
Answer: Factors include OEMs' efforts to reduce costs through engineering innovations and the launch of affordable models, which are crucial for meeting sales goals.
Question 1: What is the primary goal of the FAME 2 Subsidy Scheme?
A) To reduce pollution
B) To promote electric vehicle adoption
C) To increase fuel prices
D) To support traditional vehicles
Correct Answer: B
Question 2: What was the previous subsidy amount per kWh for e-2Ws under FAME 2?
A) ₹10,000
B) ₹15,000
C) ₹20,000
D) ₹5,000
Correct Answer: B
Question 3: What percentage of the ex-factory price is now capped for e-2W subsidies?
A) 40%
B) 30%
C) 15%
D) 25%
Correct Answer: C
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