Subsidy for Electric Two-Wheelers to Cease after FAME III Introduction

Government's Stance on FAME III & Subsidy Reduction

The impending termination of subsidies for electric two-wheelers looms as the government hesitates to introduce the third phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME III) scheme. This initiative, fervently advocated by the heavy industries ministry owing to demands from local manufacturers, faces resistance within the government circles.

Opposition Within Government Departments

Despite the heavy industries ministry's push, the finance ministry's opposition to the FAME III proposal finds resonance among other government wings. Earlier reduction of subsidies this year resulted in a decline in electric two-wheeler demand, but recent trends suggest a stabilisation, prompting officials to underscore the natural transition toward cleaner-fuel vehicles due to their economic advantages despite higher upfront costs.

Status of FAME II and Future Projections

As FAME II, applicable to two-, three-, and four-wheelers in public transport, approaches its conclusion in the upcoming weeks, an estimated 10 lakh two-wheelers are anticipated to benefit from subsidies, following fund reallocation prompted by domestic market demands. The scheme initially had an allocation of INR 10,000 crore.

Shift in Government Focus and Potential New Schemes

While the heavy industries ministry had pursued a more ambitious plan, lacking substantial support, the government's current focus diverts toward a prospective scheme aimed at incentivizing high-end electric car manufacturers, including Tesla, to establish manufacturing units in India for both domestic and export markets. 

This new scheme, under internal government deliberation, could adopt a production-linked incentive mechanism or phased manufacturing plan.

Reasons for Ceasing FAME Support and Regional Market Dynamics

Apart from the lack of backing for FAME III, irregularities observed among certain companies under the FAME initiative contribute to the decision against extending fresh support. Notably, while demand for electric two-wheelers thrives in southern and western regions, a dearth exists in the North and East. 

Manufacturers aspire for renewed support to expand the vehicles' presence across India, especially given substantial investments in charging infrastructure and rising awareness.

The potential shift in policy indicates a pivotal moment in India's electric vehicle landscape, with broader implications for both local and global manufacturers, and regional market dynamics are likely to evolve in response to forthcoming policy adjustments.