The second phase of Faster Adoption and Manufacturing of Electric and Hybrid (FAME-II) does not provide any incentives to private car buyers of electric vehicles.
Tata Motors, India’s fourth-largest carmaker, has welcomed the government’s FAME-II scheme but hopes that private buyers of electric vehicles will also get incentives in the future.
While the second phase of Faster Adoption and Manufacturing of Electric and Hybrid (FAME-II) does not provide incentives to private electric vehicle buyers, benefits to the tune of Rs 1.38 lakh is given to non-private buyers.
Without incentives, electric vehicles appear to be priced significantly higher, enough to discourage several private buyers. For instance, even with an incentive of Rs 1.24 lakh, the electric Tata Tigor (on sale only for a government company) is priced twice that of its petrol cousin.
FAME-I had offered incentives regardless of the end use of the vehicles. The second version of the scheme, however, continues with its focus on both, electric and hybrid vehicles. Tata Motors has chosen to concentrate on electric vehicles.
Speaking to Moneycontrol, Guenter Butschek, Managing Director, Tata Motors said, "We have always said that (FAME-II) should focus only on one technology as far as electrification is concerned. FAME addresses a lot of issues. I can sit and complain about that one particular element about the private buyer. But we appreciate all the positives about FAME-II."
Some car makers who are lining up electric vehicle launches in the coming months voiced their concern over pulling out of incentives for private buyers under FAME-II. Top executives of Renault India and Hyundai India believe that government incentives are necessary to give electric vehicles the initial nudge.
In a recent interview to Moneycontrol, SS Kim, President and Managing Director, Hyundai Motor India, said, "The cost of manufacturing an electric vehicle is much higher than making those with an internal combustion engine because the battery cost is extremely high. To aggressively go after EVs and hybrids, government support is critical in promoting its sales."
However, Tata Motors believes private buyers were not the first choice for making electric cars available in mass numbers.
"Volume-wise in the coming three years, this (private buying) is anyway not envisioned as a major play because getting into electrification for four wheeler business is about fleet and corporate trends. Such kind of incentive would have encouraged the private buyer. But the overall play in terms of volumes in the years to come they would have been a smaller portion. I still hope that there some room for discussion but this room is not going to be decisive for the success for electrification and e-mobility in India," added Butschek.
In the petrol-diesel-CNG category, the share of car buyers that put their vehicle to commercial use has been on a decline for the last few years. From around 15-20 percent during its peak, their share has fallen to below eight percent as per estimates provided by car makers. The primary reason behind the fall is oversupply and falling incentives. These cars are put to use under Ola, Uber and other app-based and off-line taxi operators.
Another rider in FAME-II states that only those EVs priced under Rs 15 lakh can benefit from this subsidy. A majority of electric and hybrid cars will be priced above that limit given that their local manufacturing or assembly will take time.
A section of car makers believe that the Centre will come out with a revised FAME-II scheme after the new government assumes office in a few months."Let us take what has been provided to us, it is a huge and incredible opportunity and we have to focus on it. The products that we are going to provide in the future will also target the private sector. People will buy with or without the incentive but the sales would accelerate with the incentive," added Butschek.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.