Electric Two-Wheeler Sales Decreased Post-FAME-II - ICRA survey

The FAME-II gave certain terms and conditions, which were supposed to promote the sales of electric two-wheelers in the country. These, however, have turned out to be one of the reasons for the reduction in their sales.

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National survey comprehending 16 electric bike dealers carried out by ICRA, the eligibility criteria formed under FAME II have lowered their sales. The major cause of damping is proven to be minimum localization and exclusion of lead-acid-based electric bikes.

The FAME-II gave certain terms and conditions, which were supposed to promote the sales of electric two-wheelers in the country. These, however, have turned out to be one of the reasons for the reduction in their sales. The eligibility criteria, the central government’s flagship scheme, which was to claim the subsidy under FAME-II, have lowered their sales. The demand and volume increase of electric two-wheelers have been very low, despite the government’s focus on adopting electric vehicles (EV). ICRA said that the situation will remain unchanged in FY22 due to the low base.

National survey comprehending 16 electric bike dealers carried out by ICRA, the eligibility criteria formed under FAME II have lowered their sales. The major cause of damping is proven to be minimum localization and exclusion of lead-acid-based electric bikes. ICRA stated, even though the government is emphasizing more on supportive approach and adaptation of electric vehicles (EV), the demand – volume outlet still remains mostly unchanged reason being the low base. In response to the nationwide survey held by ICRA, 50 per cent two-wheeler dealers reported the damp in sales post FAME- II reason being most models failing the eligibility for subsidy stated in the policy. Additionally, only 2 per cent of targeted sales could be achieved during the mid of three-year tenure by September 30, 2020.

While the sales report of electric two-wheelers had shown 21 per cent Y-o-Y growth to 1.5 lakh units in FY20, the number of electric two-wheelers which availed FAME-II subsidy has decreased. During the halfway mark of its three-year tenure till September 30, 2020, the scheme had achieved only 2 per cent of its target sales.

Incentive eligibility stands exclusively for lithium-ion battery powered two wheelers only whereas 70 per cent of two wheelers in the market as of now are lead-acid battery powered and thus excluded from incentive claims. Adding up to the statement, the major concern has been the prices of li-on battery which costs almost 40 to 50 per cent of the overall cost of the electric vehicle. Because of inadequate and underlaying domestic supply, majority OEMs import Li-ion Battery from China-based companies and manufacturer which effects localization for claiming subsidy, said the rating agency. Low product knowledge and awareness is another reason for sales collapse as the most potential customers are sticking to previous runs.

In recent times the Global Pandemic has hit the market hard and EVs aren’t untouched either. Most of the potential customers are seeking for a second vehicle and the pandemic has suppressed the urgency and need of it for time being which has lowered the demand. Closed institutions and restrictive travelling have also affected the need for potential customers. Though the announcement of EV policies in states like Telangana and national capital Delhi may increase public interest and demand for sales of EVs without battery to medium terms. Around 50 per cent of the consumers said that their interest in electric two-wheelers increased after the government had announced the EV policies in select states, which gave a good deal in select markets, like Delhi.

ICRA expects 15 per cent contraction in domestic two-wheeler volume for the year 2021 reason being pandemic and health concerns emerging and economical uncertainties. The wholesales volume was 38 per cent lower on a year-to-year basis in the first half of 2021 scheme period. Offering over taxes benefits and creating awareness about EV’s has been suggested to be made by the government to boost the EV market considerably. Dealers reported that only 20 to 30 per cent of electric two-wheeler sales are currently happening in the country as compared to 40 to 50 per cent that is being enjoyed by the conventional two-wheelers in India. 80 per cent of total dealers believe, more financial options may drive faster adoption of EVs.

According to ICRA Survey, 80 per cent of dealers expect flattish to moderate growth in electric two-wheeler sales in FY21, albeit on a low base.

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