Central Government Policies for 2 Wheelers in India

Electric vehicles (EVs) are rapidly emerging as the future of global transportation, and India is no exception. The Indian government has recognized the importance of transitioning to electric mobility to reduce air pollution, decrease reliance on fossil fuels, and lower greenhouse gas emissions. As part of this broader effort, the Indian Central Government has introduced several policies and incentives to promote the adoption of electric vehicle 2-wheelers in the country.

The FAME Scheme and Subsidies for two-wheeler EVs

The Indian Central Government came up with the National Electric Mobility Mission Plan (NEMMP) in 2013 with targets to save 9.5 billion liters of crude oil (i.e., USD 10 billion). NEMMP was developed to encourage the production and deployment of EVs by introducing several financial incentives, R&D support, and installation of charging infrastructure for electric vehicles in India through schemes such as FAME. The Indian Central Government announced initiatives like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME I & II) scheme, and the Production Linked Initiative (PLI) scheme to promote the adoption of EVs and encourage the use of EVs.

The FAME scheme was initiated in 2015 to reduce the usage of petrol and diesel vehicles. This scheme focused mainly on four areas i.e., Demand creation, Pilot projects, Technological development, and Charging infrastructure. It targets to convert 30% of total transportation and 80% of all 2-wheelers in the country into electric vehicles by 2030. Later under FAME II, which came into effect in April 2019, the Indian Central Government allotted USD 1.4 billion with a target to subsidize 10,000,000 two-wheeler EVs, 500,000 three-wheeler EVs, and 55,000 four-wheeler EVs. The registered electric 2-wheelers will get an incentive of USD 280 each. These incentives include subsidies for the purchase of electric 2-wheelers used in public transportation and delivery services. After the introduction of FAME II on April 1, 2019, 2-wheeler EVs saw 13.9 times more sales than before the introduction of the scheme.

Later, the government revised the FAME-II subsidy amount to USD 120 per kWh against the earlier amount of USD 180 per kWh. It also limited the incentives on electric 2-wheelers to 15% of the ex-factory price of vehicles from 40% earlier. These changes increased electric 2-wheeler prices by up to USD 360 per unit.

PLI Scheme

On May 12, 2021, the Indian government approved the PLI scheme for manufacturing Advanced Chemistry Cells in India with a budget of USD 2.4 billion. The scheme incentivized to setting up of ACC battery manufacturing facilities in India of 50 GWh and an additional cumulative capacity of 5 GWh for niche ACC technologies in India. These ACCs will be used in batteries aimed to promote the widespread adoption of EVs and reduce the price of batteries in India.

The Indian government approved the PLI scheme for automobile and automotive components with a budget of USD 3.4 billion to boost the manufacturing of Advanced Automotive Technology (AAT) products in India including EVs and their components, creating economies of scale and building a robust supply chain. The program offers incentives equivalent to 18% of qualifying electric vehicle and component sales. The scheme's incentive became effective beginning in the fiscal year 2022-23 and will be distributed in the subsequent fiscal year, which is FY 2023-24, and this pattern will continue for a total of five consecutive fiscal years up to FY 2027-28. The scheme has two components: the Champion OEM incentive scheme and the Component Champion incentive scheme. Some OEMs selected under the Champion OEM incentive scheme include TVS, Hero MotoCorp, Bajaj Auto, and Hop Electric.

Other schemes like Guidelines for Battery Safety Tests, Amendments to EV Battery Testing Standards, Draft Battery Swapping Policy (2022) were implemented to check for quality at three levels – the battery pack, battery management system (BMS), and the cell, tightening safety requirements for electric vehicle battery, providing incentives to EVs with swappable batteries, subsidies to companies manufacturing swappable batteries, a new Battery as-a-Service (BAAS) business model, and standards for interoperable batteries. 

Impact of Government’s Initiatives 

As of 2022, 28 companies in India have either already established or are in the midst of establishing manufacturing or assembly operations for electric scooter and motorcycle production in the country. This represents notable growth compared to the 12 companies in 2015 when the government introduced the FAME initiative. In FY 2021, due to the pandemic, the electric 2-wheeler market faced a significant setback with a sales decline of 5.37%. By FY 2022, it showed remarkable recovery with sales of 327,900 units, achieving a growth rate of 128%, but it remained a relatively minor player, comprising only 1.2% of the total industry and having a limited global presence. 

However, in FY 2023, with support from government initiatives, the segment witnessed a remarkable transformation, surging ahead with 846,976 unit sales, marking an impressive 158.3% increase. India is now the second-largest electric scooter market globally, trailing only behind China. More than 1.3 million electric 2-wheelers have been sold till the first half of 2023, putting India on track for its goal of 80% electric 2-wheeler and 3-wheeler in the next seven years. 

The introduction of the FAME initiative also had a positive impact on consumers by making electric 2-wheelers more affordable as the incentive of USD 240 for registered electric 2-wheelers reduced the upfront cost. Before the government initiative, the total cost of ownership of electric 2-wheelers was relatively high compared to traditional internal combustion engine (ICE) 2-wheelers, but now, the total cost of ownership for electric 2-wheelers is notably reduced by 20-70% compared to their ICE equivalents, making them a financially viable option for users.

Conclusion

The Indian Central Government has implemented a series of policies and incentives to promote electric 2-wheelers as part of its broader push toward electric mobility. These initiatives, such as the FAME and PLI schemes, have significantly boosted the adoption of electric 2-wheelers and advanced battery technologies. Also, these measures have resulted in a substantial increase in EV sales, though subsidy adjustments have impacted pricing. The impact is evident in the substantial growth of the electric scooter market, making India a major player in the global EV industry. With continued support, India is well on its way to achieving its goal of 80% electric 2-wheelers and 3-wheelers in the next seven years, contributing to a cleaner and more sustainable transportation future.

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