The demand for electric two-wheelers is increasing rapidly these days. This is the reason why e-two-wheelers are more expensive than petrol vehicles.
Now, due to the cut in subsidy on these vehicles, the prices are likely to increase by Rs 12,000 for the second time in the year.
Will the reduction in subsidies weaken the growth of this industry, when already this industry is facing many adverse circumstances.
Mint has explained in detail how subsidy cuts will affect the growth of this industry.
Reason for reducing subsidy
The Electric Mobility Promotion Scheme was announced by the Ministry of Heavy Industries in March for a period of four months from April to July 2024.
It serves as a bridge scheme between FAME-2, which ended on March 31, 2024.
Under the scheme, the subsidy for electric two-wheelers has been halved from Rs 10,000 per kilowatt hour (kWh) to Rs 15,000 per kWh. The maximum subsidy per vehicle has also been fixed at only Rs 10,000.
third amendment
Since the announcement of the FAME-2 scheme in 2019, this is the third time that the subsidy on electric two-wheelers has been revised.
The original scheme announced with an allocation of ₹10,000 crore for five years provided a subsidy of ₹10,000 per kilowatt, capped at 20% of the ex-factory price of the vehicle.
In June 2021, it was increased to Rs 15,000 per kWh and the cap on vehicle cost was also increased to 40%.
In June last year, the government had brought the subsidy back to the original level. Now due to this new scheme the subsidy is at its lowest level since 2019.
price will be affected
The subsidy cut will increase the price of electric scooters by ₹5,000 to ₹12,000, although manufacturers may decide to bear some of this cost themselves.
For example, the subsidy on Ola SI Pro has now reduced from Rs 22,268 to a flat Rs 10,000. Till June last year, subsidy of about Rs 60,000 was received on this scooter. At present, Ola has decided not to increase the price of the scooter.
This is how sales increased
Driven by incentives under FAME-2, sales of electric two-wheelers are set to increase from 20,000 units per year in 2018-19 to over 9,10,000 in 2023-24.
However, the pace of growth declined from 65% in the last financial year to 20% in 2022-23. This is partly due to subsidy cuts last year, which resulted in a sharp decline in sales for at least four months between June and September.
A similar situation is likely to prevail this year also because sales may remain low until the new policy is announced in the budget in July.
slower than expected
The electric two-wheeler industry is not growing as fast as was expected. However, companies associated with this industry are preparing for a non-subsidy system in the near future.
It is noteworthy that electric two-wheelers are more expensive than their petrol counterparts. However, companies are now working towards making e-two-wheelers cheaper.
Strong increase in sales of electric two-wheelers after FAME-2
Number of vehicles sold 2018-19 19,252
2019-20 26,827
2020-21 44,782
2021-22 2,52,568
2022-23 7,28,021
2023-24 9,10,930
Source: Vehicle Dashboard