In a recent blow to the electric vehicle industry, the Indian government has slashed subsidies under the Faster Adoption and Manufacturing of Electric Vehicles Phase II (FAME 2) scheme. This decision has resulted in a significant increase in the prices of electric 2-wheelers, subsequently causing a sharp decline in sales. According to Vahan data, e-scooter registrations hit a 16-month low in June 2023.
The reduction in subsidies has made electric 2-wheelers less affordable for consumers, deterring them from visiting showrooms. Vahan’s vehicle registration portal reveals that only 35,461 units were sold until June 27, marking a considerable drop in sales volume. In May, the daily sales of electric 2-wheelers stood at 3,391 units, but in June, it plummeted to 1,363 units per day.
After considering the remaining four days of June, sales estimates suggest that the month’s total volume is approximately 40,000 to 40,500 units. This indicates a staggering month-on-month decline of 61% in sales.
Despite the recent downturn, there remains some optimism within the industry. Ather Energy, a prominent electric 2-wheeler manufacturer, experienced a 35-40% drop in sales compared to the previous month. However, the company’s chief business officer, Ravneet Phokela, anticipates a rebound in sales in the coming months.
Under the FAME 2 scheme, customers benefited from financial incentives in the form of subsidies, making electric 2-wheelers more affordable. These subsidies aimed to reduce the purchasing cost of such vehicles, encouraging customers to adopt electric mobility.
However, in 2023, the government made revisions to FAME 2, which included a reduction in the subsidy amount for electric 2-wheelers ahead of the March 31, 2024 deadline. This change has had a significant impact on electric 2-wheeler sales in India, affecting manufacturers and customers alike.
Previously, the subsidies offered up to Rs. 20,000 to customers purchasing electric two-wheelers. With the subsidy cut, the cost of these vehicles has increased, raising concerns about their affordability. The affordability factor plays a crucial role in customers’ decision-making process when considering electric 2-wheelers.
The elimination of subsidies is expected to have broader implications for the entire electric vehicle market. Market growth and development heavily rely on customer demand and penetration. Lower subsidies may slow down the market’s expansion, which would adversely affect manufacturers, dealers, and the overall ecosystem supporting electric mobility.
While the dip in sales and the impact of subsidy cuts are challenging for the industry, stakeholders remain hopeful for a resurgence in demand in the near future. The government and industry players may need to collaborate to find alternative strategies to incentivize the adoption of electric 2-wheelers and ensure the sustained growth of the electric vehicle market in India.
