The electric vehicle (EV) industry is experiencing unprecedented growth in India, with the sale of EVs surpassing 1.5 million units in 2023. This surge in sales has propelled the overall registration of EVs to more than 3.5 million, marking a significant achievement in the country’s transition towards reducing its carbon footprint and embracing sustainable transportation alternatives. The remarkable growth witnessed in such a short period can be attributed to government initiatives like the Faster Adoption and Manufacture of Electric Vehicles (FAME) scheme, coupled with concerted efforts by industry stakeholders.
Since the implementation of the FAME 1 scheme in Apr 2015 with a budget of Rs 895 crores, to incentivize the adoption of electric and hybrid vehicles, the government has allocated substantial funds towards the establishment of electric vehicle charging stations and providing upfront reductions in the purchase price of electric vehicles. This investment has been instrumental in creating a conducive environment for the adoption of EVs across the country. Its second phase, FAME-II, was rolled out in Apr 2019, with a substantial budget of Rs 10,000 crore and a focus on electric two-wheelers, three-wheelers, buses, and taxis. Under the FAME II scheme alone, the impact has been tangible, with a total of 740,722 two-wheelers, 83,420 three-wheelers, and 8,982 four-wheelers sold as of the latest data. As FAME III is set to expire in April 2024, the industry stakeholders have begun advocating for the necessity of a FAME III scheme to sustain and further accelerate the momentum of electric vehicle adoption in India.
Affordability barrier
The affordability barrier remains a significant challenge hindering the mass adoption of electric vehicles in India. While the FAME scheme has made strides in reducing upfront costs through subsidies and incentives, EVs still often come with a higher price tag compared to conventional vehicles. It is challenging to reduce the prices of EV vehicles while ensuring good quality and range for consumers. This difficulty has a significant impact on EV companies, as they strive to cover their costs and turn a profit. In the current situation, the industry must innovate and develop new technologies to address affordability challenges while maintaining cost-effectiveness and quality standards. This innovation is crucial for overcoming barriers to adoption and accelerating the transition to electric mobility in India. Additionally, this means that the industry requires support to sustain itself in the market and stand on its own in the upcoming future, without relying solely on subsidies. Even after accounting for subsidies, the current price gap between internal combustion engine (ICE) vehicles and EVs remains significant and EV prices could rise by 25 to 30 percent if these incentives are withdrawn on April 1, 2024. Hence, an extension of the FAME Scheme till the time the Industry can stand on its own feet would help maintain customer interest and encourage adoption.
Domestic manufacturing boost
The initiatives, through various incentives and subsidies, stimulate investment in research, development, and production, fostering job creation and economic growth. Particularly beneficial for small and medium-sized enterprises (SMEs), such schemes enable them to sustain operations, innovate, and contribute to the EV ecosystem’s growth.
By providing a conducive environment for scaling up manufacturing capabilities, such policies reduce reliance on imports and position India as a competitive player in the global EV market. Moreover, by promoting indigenous production, they enhance energy security, strengthen self-reliance, and create a resilient domestic EV industry. In essence, the extension of supportive schemes is vital for sustaining momentum in domestic manufacturing, empowering SMEs, and driving India’s transition towards a sustainable, self-sufficient EV ecosystem.
CEO and Co-founder
ARC Electric.
Decarbonization goals
India has ambitious decarbonization goals, aiming to convert 30 percent of all modes of transportation to EVs by 2030. This strategic objective aligns with the country’s commitment to reducing greenhouse gas emissions and promoting sustainable mobility solutions. Achieving this target requires sustained efforts and policy support. FAME-III will play a crucial role in driving EV adoption and providing a cleaner and more environmentally friendly transportation ecosystem for its citizens.
Policy continuity
Policy continuity is also crucial for sustaining investor confidence and fostering long-term growth in India’s electric vehicle (EV) industry. By maintaining consistent support mechanisms, such as incentives and regulatory frameworks, the government can provide stability and predictability for industry stakeholders. This continuity enables businesses to plan and execute long-term strategies, fostering innovation, competitiveness, and sustained growth in the EV market. A stable policy environment also attracts investment, promotes collaboration, and accelerates the transition toward a cleaner, greener transportation ecosystem.
The Federation of Indian Chambers of Commerce and Industry (FICCI) has proposed extending the FAME subsidy for another five years, with a three-year review. This gradual approach ensures stability while allowing adjustments based on market dynamics. In consonance with the Industry sentiments and ground reality, FICCI emphasizes that a sudden discontinuation of price incentives could mar the positive momentum and adversely impact demand creation.
In conclusion, the continuation of the FAME scheme is not just desirable but essential for achieving India’s EV adoption targets. Addressing affordability, boosting domestic manufacturing, and ensuring policy continuity are essential pillars for accelerating EV adoption. Sustained support will drive India towards a sustainable and self-reliant EV ecosystem. In summary, the FAME Scheme extension is not merely about subsidies but it’s about policy continuation and accelerating India’s EV revolution, and achieving a sustainable tomorrow for India.
