'Government should cut subsidies on e-bikes in phased manner'

The government may consider tapering off incentives on electric two-wheelers in a phased manner, instead of stopping those at once, to support sustainable growth in this fast-evolving space, said a top executive at electric scooter manufacturer Ather Energy.

The suggestion comes amid reports that the government is unlikely to extend subsidies under its flagship FAME II (Faster Adoption and Manufacturing of Electric Vehicle) scheme beyond March 2024.

“There is always going to be an impact if FAME were to go away. But serious players have been working on a roadmap to rationalise cost structures so as to be able to sell electric two-wheelers without subsidies in the long run. But it is a journey. The entire value chain has to localise, which takes time,” Ather Energy chief business officer Ravneet Phokela told ET. It will take about 2-3 years for original equipment manufacturers in the electric two-wheeler segment to come to a level where operations can be self-sustaining, he added.

The government provides an incentive of Rs 15,000 per kWh on electric two-wheelers, capped at 40% of the total vehicle cost, provided they meet the specified localisation conditions. The incentive is accounted for in the retail price of the vehicles and the government reimburses the manufacturers within 45-90 days on the submission of proof of sale. The disbursal of incentives, however, has been stalled since the start of this fiscal year, amid allegations that about a dozen companies had claimed subsidies without meeting the localisation rule.

Sales of electric two-wheelers have been growing at a fast clip since the government increased incentives under FAME II. Sales of electric two-wheelers in the local market are expected to more than triple to over 600,000 units in the ongoing financial year. However, penetration of electric powertrain remains modest at less than 5% in a market where about 16 million two-wheelers are expected to be sold by the close of this financial year ending March 31.

Phokela said irregularities on part of some manufacturers do not define the entire industry and the serious players have been working on domestic value addition. “We see a lot of potential in the market. In the scooters segment, the penetration of electric stood at 15% in February. We expect this to increase to 45-50% in the next three years. We hope subsidies continue in some form to support this growth; otherwise we would have to recalibrate plans,” he said.

Phokela said Ather Energy — which is backed by Hero MotoCorp — has been working on reducing cost structures as well as expanding the charging infrastructure to help the electric two-wheelers industry reach the tipping point. “Ather has set up close to 1,100 charging points so far. We plan to have 2,900 CI points by March 2024,” he said.The company has invested Rs 75 crore so far in the charging infrastructure across R&D and capex investments. It is looking to invest an additional Rs 45-50 crore on this in the upcoming financial year.

Interestingly, 63% of these charging stations have been set up in non-metro cities. Ather Energy, which has sold 72,000 electric scooters till February this fiscal year, is registering about 53% of total sales from non-metro centres.

Phokela said: “In terms of the total number of charging sessions, non-metro cities have overtaken metro cities in 2022. In Dec’22, non-metro cities witnessed 75,000 sessions whereas metro cities witnessed 59,000 sessions.”

The company is also working on strengthening its charging infrastructure on the highways. “We have 172 grids that connect cities. In terms of grid utilisation, in Dec’22 we saw 19,000 hours of charging on highways,” he said.


Business Asia
the authorBusiness Asia

Leave a Reply