Two recent developments in the electric two-wheeler space are noteworthy. The first, as reported by this newspaper, is that last month Ola Electric’s sales at 53,320 units ran past Yamaha’s ICE (internal combustion engine) products, which stood at 52,418 units. This is the first case of an EV manufacturer clocking higher monthly units compared to ICE products. The second development, again reported by this newspaper, seems at odds with the first one. The average daily sales of e-two-wheelers, which were around 2,900 units in February, fell to around 1,460 units in the first 15 days of the current month. Before declining, sales had peaked to a daily high of 4,501 units in March.
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What explains such a contradictory picture? It has got to do with the subsidy scheme promoting e-two-wheelers — FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) — coming to an end on March 31. A new scheme has replaced it beginning this month till July called Electric Mobility Promotion Scheme (EMPS). Simply put, the subsidy for per-vehicle sale under FAME II was around `22,000, which under EMPS has been reduced by a half to `10,000. Industry players, however, see the decline as a minor blip and adjustments which keep on happening. Sales had plummeted in June 2023 also when subsidy was somewhat lowered under FAME II. Since EMPS is valid only till July, hopes are high that a new government after assuming office will come out with a longer time-frame subsidy scheme along the lines of FAME.
The larger question is whether a subsidy-linked sales is to be welcomed or such props should be done away with after providing the initial push. Contrary to popular perception, the electric two-wheeler industry is in-principle not supportive of any extended subsidy-linked sales incentives as most of them have achieved substantial scale of operations. The e-two-wheeler market share at 5.4% is almost double of electric passenger vehicles. Since there’s no such thing as range anxiety in e-two-wheelers because they are used for limited distances, and charging is also not a problem as the detachable batteries can be charged at home just like mobile phones, higher adoption is a low-hanging fruit and does not throw many challenges. The only challenge is the resale value which does not compare with ICE products.
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Since the industry is prepared for a life without subsidy, the government should seize the opportunity to bring about some long-term reforms in the incentive scheme. Rather than reimbursing manufacturers for selling at subsidised prices, where a section of players were even found to be fudging numbers and indulging in certain other malpractices, the government should look at lowering their cost of manufacturing. This can be done by coming out with a modified production-linked incentive (PLI) scheme for the automobile sector by subsuming the current subsidy given to two-wheelers, three-wheelers, and four-wheelers used for public transport. Currently, there are two PLI schemes for the auto sector. One relates to automobiles and auto components with an outlay of `25,938 crore and the other for advanced chemistry cell batteries with an outlay of `18,100 crore. Since the disbursement of PLI incentives are on the basis of incremental sales and production targets, apart from checking malpractices, the industry would be spurred to look for innovative methods to bring down the cost of batteries which make up 40% of the cost of e-two-wheelers.
Two recent developments in the electric two-wheeler space are noteworthy. The first, as reported by this newspaper, is that last month Ola Electric’s sales at 53,320 units ran past Yamaha’s ICE (internal combustion engine) products, which stood at 52,418 units. This is the first case of an EV manufacturer clocking higher monthly units compared to ICE products. The second development, again reported by this newspaper, seems at odds with the first one. The average daily sales of e-two-wheelers, which were around 2,900 units in February, fell to around 1,460 units in the first 15 days of the current month. Before declining, sales had peaked to a daily high of 4,501 units in March.
What explains such a contradictory picture? It has got to do with the subsidy scheme promoting e-two-wheelers — FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) — coming to an end on March 31. A new scheme has replaced it beginning this month till July called Electric Mobility Promotion Scheme (EMPS). Simply put, the subsidy for per-vehicle sale under FAME II was around `22,000, which under EMPS has been reduced by a half to `10,000. Industry players, however, see the decline as a minor blip and adjustments which keep on happening. Sales had plummeted in June 2023 also when subsidy was somewhat lowered under FAME II. Since EMPS is valid only till July, hopes are high that a new government after assuming office will come out with a longer time-frame subsidy scheme along the lines of FAME.
The larger question is whether a subsidy-linked sales is to be welcomed or such props should be done away with after providing the initial push. Contrary to popular perception, the electric two-wheeler industry is in-principle not supportive of any extended subsidy-linked sales incentives as most of them have achieved substantial scale of operations. The e-two-wheeler market share at 5.4% is almost double of electric passenger vehicles. Since there’s no such thing as range anxiety in e-two-wheelers because they are used for limited distances, and charging is also not a problem as the detachable batteries can be charged at home just like mobile phones, higher adoption is a low-hanging fruit and does not throw many challenges. The only challenge is the resale value which does not compare with ICE products.
Since the industry is prepared for a life without subsidy, the government should seize the opportunity to bring about some long-term reforms in the incentive scheme. Rather than reimbursing manufacturers for selling at subsidised prices, where a section of players were even found to be fudging numbers and indulging in certain other malpractices, the government should look at lowering their cost of manufacturing. This can be done by coming out with a modified production-linked incentive (PLI) scheme for the automobile sector by subsuming the current subsidy given to two-wheelers, three-wheelers, and four-wheelers used for public transport. Currently, there are two PLI schemes for the auto sector. One relates to automobiles and auto components with an outlay of `25,938 crore and the other for advanced chemistry cell batteries with an outlay of `18,100 crore. Since the disbursement of PLI incentives are on the basis of incremental sales and production targets, apart from checking malpractices, the industry would be spurred to look for innovative methods to bring down the cost of batteries which make up 40% of the cost of e-two-wheelers.
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Recharge the EV space
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1
17.04.2024
Two recent developments in the electric two-wheeler space are noteworthy. The first, as reported by this newspaper, is that last month Ola Electric’s sales at 53,320 units ran past Yamaha’s ICE (internal combustion engine) products, which stood at 52,418 units. This is the first case of an EV manufacturer clocking higher monthly units compared to ICE products. The second development, again reported by this newspaper, seems at odds with the first one. The average daily sales of e-two-wheelers, which were around 2,900 units in February, fell to around 1,460 units in the first 15 days of the current month. Before declining, sales had peaked to a daily high of 4,501 units in March.
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What explains such a contradictory picture? It has got to do with the subsidy scheme promoting e-two-wheelers — FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) — coming to an end on March 31. A new scheme has replaced it beginning this month till July called Electric Mobility Promotion Scheme (EMPS). Simply put, the subsidy for per-vehicle sale under FAME II was around `22,000, which under EMPS has been reduced by a half to `10,000. Industry players, however, see the decline as a minor blip and adjustments which keep on happening. Sales had plummeted in June 2023 also when subsidy was somewhat lowered under FAME II. Since EMPS is valid only till July, hopes are high that a new government after assuming office will come out with a longer time-frame subsidy scheme along the lines of FAME.
The larger question is whether a subsidy-linked sales is to be welcomed or such props should be done away with after providing the initial push. Contrary to popular perception, the electric two-wheeler industry is in-principle not supportive of any extended subsidy-linked sales incentives as most of them have........
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