Power Drive

Incentives to spur EV uptake

The central government has set a goal to ensure that 30 per cent of new vehicle sales by 2030 comprise electric vehicles (EVs). In a move to achieve this goal, the government recently extended the duration of its flagship e-mobility scheme, FAME-II (Faster Adoption and Manufacturing of Hybrid EVs, Phase-II), and also enhanced its incentives. The move has been welcomed by industry players, who believe it will accelerate the adoption of electric two-wheelers, which are one of the most promising EV segments in terms of the growth potential. In another development, Gujarat recently notified a new EV policy, offering various incentives to users to drive the adoption of EVs.

Power Line presents a round-up of the key developments in the EV space in recent months…

FAME-II amendments

In a gazette notification dated June 11, 2021, the Department of Heavy Industy (DHI) has increased the demand incentive for electric two-wheelers to Rs 15,000 per kWh from the earlier uniform subsidy of Rs 10,000 per kWh for all EVs (including plug-in hybrids and strong hybrids, except buses). The incentive cap for electric two-wheelers has also been raised to 40 per cent of the cost of vehicles, as against 20 per cent earlier.

The notification further states that aggregation will be the key method for bringing the upfront cost of electric three-wheelers to an affordable level and at par with internal combustion engine (ICE) three-wheelers. For this, Energy Efficiency Services Limited (EESL) will come out with an aggregate demand for 300,000 electric three-wheelers for multiple user segments. Likewise, for electric buses, cities with a population of over 4 million – Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune – will be targeted. For these nine cities too, EESL will go for demand aggregation on an opex basis. The implementation details will be worked out by EESL.

In addition, in a notification dated June 25, 2021, the DHI extended FAME II for a period of two years, up to March 31, 2024. Initially, the scheme was proposed to be implemented over a period of three years and was set to expire in 2022. The extension will help meet the targets set under the scheme. To recall, the FAME II scheme was launched in April 2019, with an outlay of Rs 100 billion to encourage mass adoption of EVs. Under the scheme, the government intends to offer support to mobilise 55,000 electric passenger vehicles, 1 million electric two-wheelers, 500,000 electric three-wheelers and 7,000 electric buses.

EV manufacturers are upbeat about these changes in the scheme, especially the 50 per cent increase in incentives to electric two-wheelers. Ketan Mehta, chief executive officer and founder, HOP Electric Mobility, commented, “The revision in the FAME policy will help Indian EV companies in better development and sale of electric products amid the pandemic. This subsidy will help us accelerate the demand for EV products amid the pandemic and help the market grow immensely. We also believe that it will promote the development of a strong EV ecosystem, along with the goal to make our products 100 per cent Made in India.”

Pankaj Tiwari, chief marketing officer, Nexzu Mobility, stated, “The government’s move to increase subsidy to electric bikes and scooters by 50 per cent, subject to those that meet the FAME II criteria, is a welcome stimulus, which will boost adoption and encourage research, development and innovation for an enhanced customer experience. The development will surely provide a fillip to Indian EV companies to manufacture the finest, electric high speed mobility solutions. It will also help firms to boost the growth of the EV space across the nation. However, we would also like to see electric bicycles fall in the ambit of FAME II, with an independent incentive for two-wheelers, based on some of the key features like battery power, etc.”

The industry believes that the high price of electric two-wheelers is the biggest challenge to their adoption and the increase in incentives will help bring their prices closer to that of ICE variants. The Society of Manufacturers of EVs estimates that revisions will bring down the cost of city-speed electric scooters in the range of 100 km per charge to less than Rs 60,000 and high speed scooters with a range of 80 km to about Rs 100,000.

Gujarat EV policy

In June 2021, the Gujarat government notified a new EV policy to facilitate the transition of its transportation sector to e-mobility. The Gujarat EV Policy, 2021 will be valid for a four-year period starting July 1, 2021. The policy has been formed with four broad objectives. In addition to transitioning the state’s transportation sector to e-mobility, the policy aims to build a manufacturing hub for EVs and ancillary equipment. Additionally, it aims to encourage start-ups in the EV space and foster the development of support sectors such as data analytics and information technology. The policy is basically targeted at improving the quality of the environment by reducing air pollution.

The policy, during its period of operation, will offer support to consumers who purchase the first 200,000 EVs for either individual or commercial use. These include 110,000 two-wheelers, 70,000 three-wheelers and 20,000 four-wheelers. Along with this, it aims to promote the setting up of 250 EV charging stations in the state, in addition to the 278 that have already been approved under the government’s FAME II programme.

The Gujarat EV Policy, 2021, with an outlay of Rs 8.7 billion, will offer exemptions, subsidies and incentives to consumers as well as manufacturers in the EV space. To increase the uptake of EVs at the consumer level, the policy offers demand incentives based on a vehicle’s battery capacity (in kWh). All EVs registered in Gujarat during the policy period will also be exempt from the registration fee.

That said, the policy specifies the threshold price for which subsidies can be availed of, based on the type of vehicle. The maximum amount of subsidy should not be more than 40 per cent of the ex-factory price of the vehicle; the lesser amount will be given as the subsidy. It must also be noted that these demand incentives from the state will be over and above any subsidies that are available from the central government through its promotional schemes and policies such as FAME II. The second series of incentives offered by the policy are aimed at promoting the development of charging infrastructure in the state. It equally encourages a variety of business models to build the charging infrastructure of different capacities and technologies. Further, it calls for a range of players to install stations, including those privately owned, discom owned, or investor owned.

A notable feature of these incentives is that they offer a capital subsidy of up to 25 per cent on equipment/machinery (limited up to Rs 1 million) for the first 250 commercial public EV charging stations. Petrol pumps will be allowed to set up charging stations, subject to passing tests for fire and safety standards. Even households and commercial establishments can install charging stations at the designated parking spaces after obtaining a no-objection certificate. In addition to these incentives, the state government will offer a 100 per cent exemption on electricity duty for EV charging stations during the policy period. It also proposes that state electricity distribution licensees should link the charging of EVs from the existing connection of a consumer at the existing tariff, except in the case of an agricultural connection.

For EV manufacturing, the policy document states that all parties that wish to set up or upgrade their facilities will receive benefits as per the Gujarat Industrial Policy, 2020. Under the policy, EV and EV component manufacturing are listed as sunrise sectors and will be given incremental incentives over the five-year policy period.

The industry’s response to the policy has largely been positive as the demand incentives mean that EVs in Gujarat are now among the cheapest. To this end, a multifold increase in the uptake of these vehicles is expected. One concern, however, is that there are very few four-wheelers in the Indian market that are eligible for receiving subsidies. This might need to be revised if the specific policy targets are to be met. EV manufacturers have praised the “progressive policy”, especially because it prioritises the EV charging infrastructure to address the issue of range anxiety among consumers and spur greater adoption.

Conclusion

Recent developments in the EV space are quite encouraging and are expected to nudge consumers to shift to EVs. Given the benefits of low operations and maintenance costs and zero emissions, EVs certainly offer an edge over ICE vehicles, which have been rendered unaffordable owing to the spate of recent fuel price hikes. That said, range anxiety is still a major barrier to the mass adoption of EVs and, therefore, large-scale development of charging infrastructure will be crucial in the coming years.

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