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March 16, 2024

Electric Vehicle Manufacturers Express Discontent with New Subsidy Scheme

The recent unveiling of the Electric Mobility Promotion Scheme (EMPS) 2024 by the Ministry of Heavy Industries has triggered a lukewarm response from manufacturers of electric vehicles (EVs). This ad hoc subsidy scheme, intended to replace the flagship Faster Adoption and Manufacturing of Electric (and Hybrid) Vehicles-II, has failed to ignite enthusiasm among sector majors primarily due to its lower level of incentives and increased stringency in claiming subsidies.

Major players in the electric vehicle industry have voiced concerns over the implications of the new scheme. They argue that the reduced incentives and delays in subsidy disbursement could potentially deter them from availing the benefits offered. One top executive from a leading electric two-wheeler company remarked, “We anticipated the government’s financial constraints regarding EV subsidies. However, with subsidies limited to just four months, we anticipate slower growth and must focus on higher premiumization to maintain margins.”

The industry’s sentiment reflects a shift towards a non-subsidy-based growth strategy, emphasizing long-term sustainability over short-term incentives. Some stakeholders suggest that incentives under the Production-Linked Incentive (PLI) scheme could offset the impact of reduced subsidies from the EMPS. However, concerns persist, particularly among electric bike manufacturers, as the maximum subsidy cap for electric two-wheelers has been significantly lowered.

For instance, the maximum subsidy cap for electric two-wheelers has been reduced from Rs 22,500 to Rs 10,000 per vehicle, posing challenges for manufacturers in maintaining competitiveness and innovation. CEOs from electric bike companies express apprehension about the impact on product volumes and technological advancements, anticipating a shift towards lower-capacity models to navigate the subsidy constraints.

Similarly, manufacturers of electric three-wheelers (e3Ws) express discontent with the substantial reduction of over 50% in subsidies under the new scheme. This reduction poses a significant setback for the segment, prompting concerns among industry players about the viability of sustaining growth and innovation. Despite indicating intentions to engage with the scheme, e3W manufacturers emphasize the need for reconsideration of subsidy reductions, especially if the government plans to extend the scheme beyond the initial four-month period.

Hyder Khan, CEO of Godawari Electric Motors, highlights the importance of revisiting subsidy levels to support the e3W segment’s growth trajectory. He emphasizes that the reduction in subsidy amounts, particularly for e3Ws, could hinder the segment’s progress and innovation potential, urging policymakers to reassess the subsidy framework’s efficacy in fostering sustainable growth in the electric vehicle market.

In conclusion, while the EMPS 2024 aims to promote electric mobility, its lukewarm reception among manufacturers underscores the need for a comprehensive and sustainable subsidy framework aligned with industry growth objectives. As stakeholders navigate the evolving policy landscape, collaboration between the government and industry players becomes paramount in fostering a conducive environment for the widespread adoption of electric vehicles in India.

Jhumpa Lahiri

Jhumpa Lahiri

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