The government is investigating allegations that some electric two-wheeler makers had availed of the subsidy benefit without meeting the condition on the use of local components as specified under Phase 2 of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) programme. In their submissions to the government, the companies have denied any wrongdoing, ET reported last month.
Meanwhile, authorities are also looking into another complaint that some companies had artificially kept their prices low by billing chargers and proprietary software separately to qualify for the subsidy.
The companies have already passed on the subsidy benefits to buyers expecting the government to reimburse that, which used to happen within 45-90 days. Since the payment has not come for several months, they are facing a shortage of capital, industry executives said.
At least 26 electric two-wheeler makers are eligible for the subsidy as per the National Automotive Board portal. Of these 11 account for more than 90% of the volume, said Sohinder Gill, director-general of the Society of Manufacturers of Electric Vehicles.
All these 11 are under one investigation or another with subsidies stopped, leading to the overall monthly sales stagnating rather than the 20% growth expected month-on-month, said Gill, who is also chief executive Hero Electric, one of the companies that has been impacted.
Another concern that most manufacturers have is that the subsidy may run dry before its deadline of March 2024. While sales may touch 1 million electric bikes by the end of the quarter ending September this year (second quarter of fiscal 2024), the battered manufacturers may not have enough steam to keep the growth momentum to reach the 2-million-plus target in FY24, say experts.
“And the government has not given clarity yet of whether it plans to extend the subsidies further,” said Jay Kale, senior vice president and equity analyst, auto and auto ancillary, at Elara Capital.
Subsidies are meant to bring a price parity between vehicles that have electric motors and fossil fuel-run engines, thereby nudging buyers to go for the cleaner option. The incentive is tapered down as industry reaches a critical mass.
“As we approach the next phase of transport decarbonisation, the question to be asked is what next, to continue with the same segments or other segments like e-bicycles, quadricycles and commercial vehicles. This all depends on, at what stage of maturity the market is and the consumer is,” said Randheer Singh, director of electric mobility and senior team member for the Advanced Chemistry Cells programme in the Niti Aayog.
Manufacturers who meet the regulations get the subsidy. “I feel manufacturers should have developed the local ecosystem of value addition, which in most cases, especially in light electric vehicles segment, is common,” said Singh.
Other electric vehicle segments are not affected by the government decision.
The electric two-wheeler segment is now in a consolidation phase with only the larger players able to survive. The marginal players see their cash reserves dwindling as disbursement of subsidies delays, affecting their cash flows and production schedules, said Nikunj Sanghi, an automotive dealer.
