Considering feedback from the industry, the Government has been considering remodeling of the FAME-2 scheme to improve acceptance. FAME II scheme was announced in Mar’19 with allocation of Rs 100 billion, but has not achieved desired results due to its stringent criteria and multiple challenges for OEMs to meet them. For instance, vehicle incentives distributed so far stands at only Rs 2.2 billion.
The Ministry of Heavy Industries has now announced partial amendments to FAME II (Faster Adoption and Manufacturing of Electric Vehicles in India) scheme to support EV adoption in 2Ws, 3Ws and Buses (amendment notification). Lauding the latest revision in the FAME-II norms by the Centre, stakeholders in the sector have said that the move will substantially increase the demand for electric bikes and scooters. We decode what all changes have been made to the FAME-II policy:
E-2Ws: Increase in demand incentive to Rs 15,000/KWH from Rs 10,000/KWH, with maximum cap at 40% of the cost of vehicles.
E-3Ws: State-owned Energy Efficiency Services (EESL) will come out with an aggregate demand for 300,000 units for multiple user segments. This bulk tendering should lead to economies of scale for OEMs and consequent reduction in the prices of products. The details will be worked out by EESL for implementation.
E-Buses: Cities with over 4mn population (Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune) will be targeted. The details shall be worked out by EESL for demand aggregation and implementation.
Reducing total cost of ownership (TCO) gap for 2Ws: TCO indicates acquisition and running costs till vehicle is disposed, calculated on a per km basis. As per our calculations, TCO for an ICE scooter (Honda Activa) stands at Rs 5.7/km, while it is higher for E-2W (Ather 450 Plus) at Rs 7.2/km, assuming a monthly usage of 500kms. Including the Rs 5,000/KWH additional incentive, the TCO reduces to Rs 6.5/km. In case of monthly usage of 700kms, TCO will now be similar, which should attract customers with higher usage, especially from the commercial segment.