Small and new players in the electric vehicles (EV) segment will bear the brunt of the Centre’s move to reduce subsidy on electric two-wheelers from 40 per cent to 15 per cent under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) II scheme.
According to analysts, while major EV players will not have a huge impact, only electric two-wheeler players could see a change in volumes.
“OEMs manufacturing both internal combustion engine (ICE) and electric two-wheelers will be better placed to manage the impact of lower subsidy... Electric-only two-wheeler players may see pressure on volumes in the near term, should they increase prices of EVs, to offset the impact. It will mostly be felt by regional fragmented EV players, who operate with very low margins,” said Anuj Sethi, Senior Director, Crisil Ratings Ltd.
With the reduction in subsidy and companies increasing the cost of electric two-wheelers, the EV penetration in the country could be impacted.
“Depending on the battery capacity, the price increase could range from a minimum of ₹10,000-20,000. In terms of percentage, this translates to approximately 6-15 per cent price hike for electric two-wheelers. This shift in pricing dynamics will create a level playing field for all players in the market,” said Anmol Bohre, co-founder and Managing Director, Enigma EV.
“Even assuming that OEMs will partially absorb part of the additional cost on account of lower subsidy/vehicle, this may temporarily slow down the sale of electric two-wheelers in the short term. However, battery costs, too, are set to decline in line with lithium prices, and if cost benefits are passed on, it could help push the sale of electric two-wheelers,” Sethi added.
EV players are anticipating the continuation of subsidy and no further reduction by the government.
“FAME II provided subsidies of over ₹10,000 crore to the industry since its launch in 2019 and has helped make EVs more affordable and accessible to consumers. I urge the government to continue its support for the EV industry, as it has the potential to create a more sustainable and prosperous future for India,” said Pritesh Mahajan, co-founder and CEO, Revamp Moto.