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Budget 2024: Electric Two-Wheeler Firms Brace for Subsidy Sunset

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Robin Attri
Robin Attri
|Updated on:19-Jul-2024 01:09 PM

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ByRobin Attri

Updated on:19-Jul-2024 01:09 PM

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The 2024 Budget may end subsidies for electric two-wheelers, shifting focus to electric three-wheelers and commercial vehicles.

Budget 2024: Electric Two-Wheeler Firms Brace for Subsidy Sunset

As the Union Budget 2024 approaches, electric two-wheeler (e2w) manufacturers are facing uncertainties about the future of purchase subsidies. Currently, the sector benefits from the Electric Mobility Promotion Scheme (EMPS) 2024, offering a subsidy of INR 10,000 per e2w, but this scheme is set to expire on July 31st.

The Future of FAME III and Subsidies

The industry is speculating about a possible third edition of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) subsidy scheme. However, it's unclear if e2w sales will be included. One industry leader believes the sector might be excluded entirely, while another suggests the subsidy might be reduced to a token amount.

Impact of Production Linked Incentive (PLI) Scheme

The government's rationale for reducing e2w subsidies is linked to the PLI scheme, which offers supply-side incentives. Major e2w players like Ola, Ather, and TVS Motor Co. are expected to benefit from PLI incentives, covering 13-18% of vehicle prices. Given these incentives, the need for high purchase subsidies is less compelling.

Industry Consolidation

The past fiscal year has seen significant consolidation in the e2w industry. Market leaders like Ola, Ather, TVS, and Bajaj Auto have increased their market share, while others have struggled with working capital issues and subsidy misappropriation allegations. In June, Ola captured 46% of the market, with Ather, TVS, and Bajaj also expanding their shares.

The current market leaders are engaged in intense price wars, with many e2w priced below INR one lakh. This has further strained struggling OEMs, leading to reduced operations and waiting out the pricing battles. An industry leader noted that price wars might subside in the coming months, stabilizing the market.

Low EMPS Claims

The EMPS portal shows claims for subsidies on fewer than 15,000 vehicles, far below the potential support for over 3.33 lakh e2ws. Delays in portal activation and unresolved subsidy misappropriation issues have contributed to the low numbers. Companies like Hero Electric, Okinawa Autotech, and Greaves Electric Mobility have faced difficulties in getting approvals for subsidies.

An industry leader explained, “Data has been piling up with OEMs and this needs to be filed with the ministry of heavy industries… this has led to delay in filing for subsidies in EMPS. Now the portal is up and running and claims will be filed. In any case, there is a 120-day cycle to sale -- which means the OEM has a 120-day window between vehicle sale to the end customer and filing for subsidy claim. So claims will be filed even after the expiry of EMPS on July 31.

Carbike360 Says

As the Union Budget 2024 nears, the e2w industry is bracing for potential changes in subsidy policies. With a possible shift in government focus and the introduction of the PLI scheme, the landscape for electric two-wheelers in India is set for significant changes. Industry players are closely watching the developments, preparing to adapt to the new policy environment.

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