Electric scooters to be 70% costlier than petrol ones sans FAME 2 subsidy: ICRA

With the FAME 2 subsidy slated to see a sunset on 31st March 2024, the electric scooters would become 70 per cent costlier than their petrol counterparts, claims a study by rating agency ICRA. The agency has stated that without the FAME 2 subsidy, the initial purchase cost of an electric two-wheeler would increase by close to 10 per cent compared to that with the incentives.

The study also claims that penetration of electric vehicles in India’s two-wheeler market will reach up to eight per cent in FY2025. While the end of the FAME 2 subsidy may come as a blow to EV buyers and manufacturers, the recent announcement of the Electric Mobility Promotion Scheme (EMPS) 2024 will continue to support the adoption of electric vehicles in the country, stated the report. The EMPS has allocated a total amount of ₹333.39 crore to support electric two-wheelers, under which 333,387 electric scooters will receive ₹10,000 benefits between April and August 2024.

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However, the EMPS comes with a reduction in the quantum of subsidy being offered for each vehicle vis-a-vis the existing FAME 2 guidelines, which will result in the initial purchase cost of an electric two-wheeler increasing by close to 10 per cent compared to that with the FAME 2 subsidy.

Speaking about the impact of the end of FAME 2 and the introduction of EMPS 2024, Shamsher Dewan, Senior Vice President and Group Head of Corporate Ratings at ICRA, said that the new scheme will continue to provide a disruption-free environment for electric two-wheelers. “Although the reduction in the subsidy benefit is a short-term impediment and may impact demand to some extent, OEMs will continue to strive to offer competitive products by leveraging their cost structure through localization of key components and value engineering capabilities,” he said, further adding that softening in battery cell prices which account for almost 40 per cent of vehicle costs will also help the EV players offset the impact of lower subsidies to some extent.