FAME II Subsidy Reduction: Hybrid Retrofitting Emerges as the Cost-Effective Alternative to New Electric 2W

The FAME II Subsidy Scheme: Accelerating Electric Vehicle Adoption

The FAME II subsidy scheme was launched in 2019 with a budget of Rs 10,000 crore to accelerate the adoption of electric vehicles. The scheme offers incentives to buyers of electric two-wheelers, three-wheelers, and four-wheelers.

Concerns Arise: Reduction in FAME II Subsidies

However, the recent reduction in the FAME II subsidy for electric two-wheelers has caused concern in the industry.

The FAME II subsidy is reduced to INR 10,000/kWh from the previous INR 15,000/kWh, effective from June 1, 2023. And the maximum subsidy has been capped at 15% of the vehicle's ex-factory price as opposed to the previous 40% subsidy.

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This means that the government will now provide a subsidy of 15% of the vehicle's ex-factory price and a demand incentive of INR 10,000 per kWh to those who purchase electric two-wheelers.

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Reasons behind the Reduction of FAME II Subsidy

There are several reasons behind the reduction of the FAME II subsidy:

1. Budget Constraints: The government's budget for the FAME II scheme was running out. The FAME II scheme was launched in 2019 and was originally scheduled to run for three years. However, the government allocated only ?10,000 crore for the scheme, which was expected to be exhausted by March 2024. The government decided to reduce the subsidy in order to stretch the available funds and extend the life of the scheme.
2. Encouraging Affordability: The government wanted to encourage the development of more affordable electric vehicles. The high subsidy under the FAME II scheme led to the development of a number of high-end electric vehicles, which were out of reach for many consumers. The government wanted to encourage the development of more affordable electric vehicles, which would be more accessible to a wider range of consumers.
3. Ensuring Financial Sustainability: The government wanted to ensure that the FAME II scheme remained financially sustainable. The government was concerned that the high subsidy under the FAME II scheme was not sustainable in the long run. The government wanted to ensure that the FAME II scheme remained financially sustainable so that it could continue to promote the adoption of electric vehicles in India.
4. Misuse of Subsidies by E2W Companies: Some electric two-wheeler (E2W) companies were misusing the FAME II subsidy in a number of ways. These included charging separately for the charger, even though the government had provided a subsidy for the charger as well, as it is an essential part of an electric vehicle. Other ways in which E2W companies misused the FAME II subsidy include not meeting the required local content norms, overcharging for the vehicles, and not providing the promised features. These actions by E2W companies led to the government reducing the subsidy for electric two-wheelers.

Note: the above reasons are based on the author's online research & observations, & not the official response by the authorities.

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Implications of the FAME II Subsidy Reduction on Electric Two-Wheelers

The reduction in the subsidy has led to an increase in the prices of electric two-wheelers. This is because the subsidy was used to offset the cost of manufacturing electric vehicles.?

With the subsidy being reduced, E2W companies will have to pass on the cost to the consumers.

Additionally, existing challenges such as range anxiety, limited charging infrastructure, and potential vehicle issues due to the novelty of the technology and usage of inferior-quality components by some manufacturers further add to the concerns of purchasing a new electric vehicle in the near future.

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A Solution Emerges: i-Hybrid Retrofitment as an Alternative

To overcome these challenges, there is an alternative option to consider: i-Hybrid retrofitment. While purchasing a new electric vehicle is not the only way to transition to electric mobility, converting your existing scooter or bike to run on both electric and petrol modes independently with a manual switch can provide a practical solution.

This way, you can avoid range anxiety by seamlessly shifting between modes as needed. Dual mode or i-Hybrid conversion offers numerous benefits and makes it a lucrative offering compared to buying an entirely new electric vehicle.

Currently, Green Tiger Mobility is the only company in the whole world to have received ARAI certification & RTO approval to retrofit petrol 2-wheelers to i-Hybrids.

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Conclusion: A More Viable Choice for Electric Mobility

In summary, the recent FAME II subsidy reduction has increased the prices of already expensive electric vehicles, further amplifying the challenge of EV adoption through buying new vehicles.

Considering this, converting your vehicle to a hybrid instead of buying a new electric vehicle emerges as a better option. This way, you can enjoy the benefits of both petrol and electric modes at a reduced cost, while extending the life of your old vehicle for more years.

To learn more about Green Tiger's vehicle conversion offering, contact us at +91 79755 92377.