New Fame perks might boost EV Sales
The Union government raised incentives for electric two- and three-wheelers last week to encourage widespread use. Some experts believe it was a desperate attempt by the government to employ funds earmarked for the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (Fame) project, as EV sales had been flat for the previous two years. Mint discusses how the substantial rise in subsidies may help drive sales of electric two- and three-wheelers, as well as the obstacles that lie ahead.
What are the most current modifications to the Fame policy, which took effect on April 1, 2019?
The government announced a 50% increase in subsidies for electric two-wheelers to $15,000 per kilowatt-hour, up from $10,000 per kWh. According to the new guidelines, the maximum on incentives will limit to 40% of the total price, up from 20% previously. The Ministry of Heavy Industries has also directed Energy Efficiency Services Ltd (EESL) to purchase 300,000 electric three-wheelers for usage by various government agencies. The public sector unit has tasked with procuring electric buses for city deployment.
The government intends to lower the cost of acquiring electric cars for government agencies and other entities through mass procurement.
Why did the government decide to boost the incentives?
The Fame plan had started in 2019 with a ten-billion-rupee budget. The government was hoping to incentivize the purchase of 7,090 electric buses, 35,000 four-wheelers, 500,000 three-wheelers, and one million two-wheelers. However, due to the high localization standards and other regulations, mainly the items in the category did not qualify for the incentives. Those who qualified received insufficient incentives to narrow the pricing gap with combustion engine cars.
Furthermore, the covid-19 epidemic impacted demand in 2020, and the disastrous second wave in April and May may affect EV sales in 2021. According to details provided by the Society of Manufacturers of Electric Vehicles, domestic EV sales fell 19.9 per cent to 236,802 units in FY21. Sales of electric two-wheelers, which account for the preponderance of sales, fell by 6% to 143,837 units in FY20, compared to 152,000 in FY20.
How did manufacturers and experts respond to the decision?
Some manufacturers, including Greaves Cotton and TVS Motor Corporation, have reduced the costs of their respective electric scooters. The top executives of firms believe that increasing subsidies will improve sales. According to Shamsher Dewan, vice-president and group head at ICRA Ltd, the initial cost of ownership for high-speed electric two-wheelers will reduce by 10-12 per cent (especially compared to present popular models) and result in a shorter payback time. Previously, the payback period projected to be four years (in terms of the total cost of ownership), but it is now three years.
What are the issues with the charging infrastructure?
The establishment of charging infrastructure has been the best barrier to the adoption of EVs in India. According to some analysts, growth in EV sales would increase the demand for power networks, which depend primarily on electricity provided by thermal power. “To meet the massive energy demand that e-mobility will bring, the power infrastructure must scale up in parallel. To make India an EV nation by 2030, we must clean, green, and enhance our power system", N. Venu, CEO and MD of Hitachi ABB Power Grids in India, stated.
As India struggles to control its carbon emissions, the government expects emissions to grow even more as the transportation industry expands. India is transitioning to a zero or low carbon discharge with the transportation paradigm by encouraging the use of any alternative fuel cars and electric vehicles (EVs) to fight transportation-related emissions.
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