With the Faster Adoption and Manufacturing of Hybrid and Electric Vehicle (FAME-II) subsidy coming to an end on March 31, electric vehicle companies are looking at focussing on the premium vehicle segment even as they hike prices by up to 25 per cent.
Also read: Electric vehicle manufacturers in a bind over subsidies as FAME-II expires on March 31
Automakers are still hoping for the subsidy to be further extended but are gearing up for a dip in sales if their request is not granted by the Centre.
Impeding growth
“The discontinuation of FAME-II subsidies not only presents challenges for EV players but also introduces the risk of a sudden 25 per cent surge in EV prices. This substantial increase raises concerns about discouraging consumers from embracing electric vehicles, potentially causing a reversal in the positive demand trajectory. Beyond the immediate impact on consumer adoption, the withdrawal of subsidies may disrupt investments from manufacturers, component makers, and charging infrastructure companies, impeding the overall growth of the EV sector and obstructing the progress of the ‘Make in India’ initiative. Aspiring for long-term self-sustainability, demand incentives remain pivotal until a 15-20 per cent demand penetration is achieved,” said Sulajja Firodia Motwani, Founder and CEO of Kinetic Green to businessline.
The Union government has recently enhanced the financial outlay of the FAME scheme to ₹11,500 crore. The scheme was rolled out in 2019 for three years with an outlay of ₹10,500 crore and was extended up till March 2024. According to electric vehicle players, the electric vehicle penetration in the country will be impacted by a rise in competition and price wars if the subsidy is not extended.
Also read: EV subsidy cut to 15 per cent given the inroads made in the market: Ministry
“This will be a challenge for the electric vehicle manufacturers. Some might focus on cost reduction initiatives by using more economic materials. Others might look to capitalise on the premium section where consumers tend to be less price conscious and the net profit is significantly higher. The discontinuation of the subsidy will adversely affect electric vehicle manufacturers. Overall sales might experience a rapid descent due to the significant cost increase which will affect the profit,” said Pritesh Mahajan, founder of Revamp Moto.