In recent times, the subsidy for electric vehicles (EVs) in India has been reduced. Additionally, the government has decided not to extend the FAME-II scheme further. However, a new scheme ‘Electric Mobility Promotion Scheme 2024’ has been initiated to encourage the sales of electric vehicles.
Let’s delve into what’s happening and what it means for investors and consumers.
What’s Happening?
According to The Economic Times, the government initially started providing subsidies to promote electric vehicles (EVs) in India. This reduced the prices of vehicles, making them more attractive and affordable to people. However, it has recently been decided to discontinue the subsidy under the FAME-II scheme after March 31st.
The image depicts the budget allocation and fund utilisation for subsidies on EVs in India.
However, there is no need to worry because while the FAME 2 scheme will come to an end, the Indian government has introduced a new scheme.
Electric Mobility Promotion Scheme
According to Mint, PTI reported that the government launched the Electric Mobility Promotion Scheme on March 13, 2024, to promote the sales of electric two-wheelers and three-wheelers. This scheme is valid from April 1 for four months until July 2024. The Central government has allocated a budget of 500 crore under the Electric Mobility Promotion Scheme (EMPS).
How Much Subsidy is Available for Buying EVs?
According to The Times of India, as per FAME-II, subsidies for two-wheelers in India are based on battery capacity, meaning the larger the battery, the more subsidy you receive. You can get a subsidy of up to Rs 5,000 per kilowatt-hour (kWh) of battery capacity, with a maximum subsidy of up to Rs 30,000.
In addition, for three-wheelers, the total cost of the vehicle or battery capacity is not considered, and a maximum subsidy of Rs 30,000 is available directly. However, the subsidy has been discontinued for four-wheeler EVs, which was only available for the first 1,000 electric four-wheelers registered under the scheme.
Under the Electric Mobility Promotion Scheme, starting from April 1, a subsidy of Rs 10,000 will be provided on two-wheeled vehicles, while three-wheeled vehicles will receive a subsidy of Rs 25,000. Additionally, there is a provision for a subsidy of Rs 50,000 on the purchase of larger three-wheeled vehicles.
Will There be No More Subsidies for Electric Vehicles?
According to Business Standard, the government has recently stated that their FAME-2 subsidy scheme will not be extended after March 31, 2024. Some time ago, there were reports that the government might extend this scheme for four months, but the Ministry of Heavy Industries has denied these reports.
However, the good news is that the budget for the FAME 2 scheme has been increased from Rs 10,000 crore to Rs 11,500 crore. This means that the money allocated for the scheme will be used for subsidies until March 31 or until it runs out.
So, if you want to take advantage of the subsidy, you can buy an electric vehicle before July 2024 with the help of the new scheme.
What Does It Mean for Investors?
The future of the Indian EV market is uncertain. Recent policy changes have made it difficult to predict how the market will develop. The Economic Survey 2023, as mentioned in Invest India, forecasts a 49 percent compound annual growth rate (CAGR) for India’s domestic electric vehicle market from 2022 to 2030.
Therefore, from a growth perspective, the industry appears to have a promising future. However, it is essential for investors to monitor whether the subsidies for EVs in India continue beyond July 2024 or not.
What’s Next?
On March 31st, the FAME-II subsidy for electric vehicles (EVs) is ending, and a new scheme has been introduced for the next four months. Therefore, if subsidies for EVs are not continued after July 2024, it could intensify competition in the EV market, potentially leading to price battles as well.
Companies might raise prices and focus more on expensive EV models where customers are willing to pay more. Some might use cheaper materials to cut costs. But without the subsidy, EV manufacturers could face challenges, sales might drop quickly, and profits could suffer.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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