The Indian government is contemplating a significant shift in its electric mobility strategy, potentially ending subsidies on electric two-wheelers (e2Ws) sooner than anticipated. This move, while aiming to boost industry self-reliance, could have a substantial impact on the e2W market’s growth trajectory.
The Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme, currently in its second phase, has been instrumental in driving e2W adoption in India. By offering subsidies of up to INR 60,000 per vehicle, the scheme has narrowed the price gap between e2Ws and their petrol-powered counterparts, making them more attractive to consumers.
However, concerns have emerged about the long-term sustainability of such high subsidies. Critics argue that they create an artificial market, hindering the development of a robust domestic e2W manufacturing ecosystem. Additionally, the potential misuse of subsidies and the burden on the exchequer are also factors being considered.
The government’s mulling of a subsidy withdrawal suggests a shift towards a more market-driven approach. This could involve phasing out subsidies gradually, allowing e2W manufacturers to focus on cost optimization and innovation to compete on price without artificial support.
The potential impact of ending subsidies is a subject of debate. Proponents believe it will lead to a healthier e2W market, with stronger manufacturers emerging and prices becoming more competitive in the long run. However, opponents warn that a sudden withdrawal could dampen consumer demand and stall the growth of the segment, potentially hindering India’s ambitious electric mobility goals.
The government is yet to make a final decision on the future of e2W subsidies. It is likely to closely monitor the market’s response to the recent reduction in subsidies implemented in June 2023 and consider various stakeholder perspectives before taking a definitive step.