Bajaj Auto’s Eric Vas Calls For Overhaul Of 2W FAME Subsidy Framework

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Vas suggested that the government might consider adopting a smarter approach to subsidy frameworks.

Eric Vas, President of Bajaj Auto’s electric vehicle division, during his speech at the India EV Conclave, pointed out the need for a revamp in the current subsidy framework for electric two-wheelers. He argued that the existing system distorts demand patterns. Vas expressed concern about subsidies being a risky and potentially harmful path for the industry. He advocated for the removal of subsidies to allow for a natural market equilibrium.

Vas critiqued the current focus of the FAME subsidy, which is based on battery size, for leading to excessive development in a specific direction. He questioned the effectiveness of this approach, noting that its true impact remains uncertain at this point.

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The FAME-II scheme offers a demand subsidy for electric two-wheelers, providing Rs 10,000 per kWh, limited to 15% of the vehicle’s ex-factory price. This has changed from the previous incentive of Rs 15,000 per kWh with a 40% cost cap. However, this subsidy excludes low-speed two-wheelers, only benefiting high-speed models that meet certain speed and range criteria.

This subsidy bias towards high-speed models, according to Vas, has led mainstream manufacturers to overlook other electric scooter segments, such as low-speed vehicles. He highlighted that Bajaj Auto, through its investment in Yulu, a Bengaluru-based shared electric mobility company, has noted the quiet growth of non-subsidized low-speed electric scooters.

Vas also proposed alternative incentives, like a GST holiday for the electric two-wheeler segment, which he believes wouldn’t cause distortions within different vehicle categories. He emphasized the need for a smarter subsidy framework and its urgent overhaul.

Regarding sustaining the growth of electric two-wheelers, Vas sees reducing costs and enhancing competitiveness as crucial. He acknowledged that government incentives like lower GST, production-linked incentives, and FAME scheme benefits, coupled with reduced registration and road taxes, currently subsidize nearly half of an electric two-wheeler’s cost. However, he questioned the long-term sustainability of such support and stressed the industry’s need to focus on cost reduction and competitive enhancement.

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