The government is likely to phase out subsidies for electric two-wheelers soon, showing little interest in initiating FAME III despite demands from domestic manufacturers and support from the Ministry of Heavy Industries. This decision aligns with the finance ministry’s opposition and broader governmental consensus on the matter. Following a subsidy cut earlier this year, electric two-wheeler demand initially declined but is now showing signs of stabilization.
The government is likely to discontinue subsidies for electric two-wheelers soon, as there’s little enthusiasm for launching the third phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME III) initiative. This reluctance comes despite advocacy from the heavy industries ministry and requests from domestic manufacturers. The finance ministry initially resisted the proposal, and other government sectors also acknowledged the validity of this hesitation. Earlier subsidy reductions led to a dip in electric two-wheeler demand, but the market is now showing signs of stabilization. This trend, coupled with the inherent economic benefits of electric vehicles despite their higher upfront costs, leads officials to believe that the transition to clean energy transportation will occur naturally.
As FAME II, which supports two-, three-, and four-wheelers for public transport, nears its conclusion in the coming weeks, the government hopes to see about 1 million two-wheelers benefit from the subsidy following a fund reallocation responding to local demands. This phase had a budget of INR 10,000 crore. Despite the heavy industries ministry proposing a more ambitious plan, there’s no backing for a third phase. This comes as the government considers a new initiative to incentivize top-tier electric vehicle manufacturers like Tesla to produce for domestic and international markets in India. This potential scheme is under discussion and may resemble a production-linked incentive or phased manufacturing plan. Furthermore, instances of irregularities in the FAME program by certain companies have also influenced the decision against additional support.
Electric two-wheeler demand is rising in southern and western India, though it remains low in the North and East. Manufacturers hope for renewed support to expand their market reach across India, especially as significant investments are being made in charging infrastructure and public awareness is growing.