February 19, 2024

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It’s time to revamp the 2W FAME subsidy framework: Eric Vas

It’s time to revamp the 2W FAME subsidy framework: Eric Vas

“There might be a more intelligent framework to subsidy, which the government can consider,” Vas said


It is clear that the India EV Conclave, organized by Autocar Professional in collaboration with the Tamil Nadu government, was a great experience for both participants and organizers. Many of the participants expressed their own ideologies and suggestions. Eric Vas, President of Bajaj Auto’s electric vehicle division, declared at the India EV Conclave that the existing subsidy framework for electric two-wheelers should be revised since it distorts the demand pattern.

As a result, Vas believes that the subsidy represents an “extremely dangerous situation” for the industry. In regards to Bajaj Auto, I would urge them to remove it as soon as possible. To let the water level itself, he advised.

At present, the FAME subsidy is determined by the size of the battery. The result has been a proliferation of developments of a particular type. It will take time for us to determine whether this is a good or a bad thing. As of right now, it cannot be proven,” Vas explained.

As part of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-II) scheme, the Indian government provides demand subsidies for electric two-wheelers.

A maximum of 15% of the ex-factory price of vehicles is covered by the subsidy of Rs 10,000 per kWh. Previously, the incentive was capped at 40% of the cost of vehicles and was set at 15,000 rupees per kWh.

Subsidies are not available for two-wheelers that travel at low speeds. High-speed models must go at least 40km/h and have a range of at least 80km to qualify for subsidies.

According to Vas, mainstream manufacturers of electric scooters are not considering other applications for electric scooters, such as the low-speed category, since the subsidy structure favors electric scooters that go up top.

As part of its investment in Yulu, a Bengaluru-based company that offers electric scooters with low speeds, Bajaj Auto has a stake in the company. According to Vas, the low-speed electric scooter market is growing at the fastest rate and is not getting recorded as much as the high-speed market.

A GST holiday for electric two-wheelers, for instance, does not appear to be distorting among the segments within the segment, according to him.

“I believe that there could be a more intelligent framework regarding subsidies, which the government might consider. Subsidies need to be restructured under the current framework. It is best to act as soon as possible, he added.

As an interim measure, Vas believes that reducing the cost of electric two-wheelers and increasing their competitiveness will be critical to maintaining the momentum of electric two-wheeler adoption going forward.

There are government incentives in the form of lower GST, production-linked incentives, FAME schemes, and reductions in registration and road taxes in some areas, which account for almost 50% of the cost of the product today.

The amount of this that will be sustainable in the future is unclear to me. The assumption is that this is going to come down,” he said, adding that, as an industry, we should focus on reducing the cost and improving our competitiveness in order to maintain momentum.

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