FAME II new policy expand its coverage and incentivizes the Hybrid Vehicles

Published Date | 2019 February 22

A uniform incentive of Rs 10,000 kWh of battery pack capacity would be extended to all electric vehicles including plug-in hybrids (PHEVs) and strong hybrids which will drive the electric vehicle market in India.
India: To promote green mobility, curbing air pollution and oil imports, the government plans to incentivize hybrid vehicles along with electric vehicles. The heavy industry department has firmed up a proposal to extend incentives linked to battery size under phase II of the Faster Adoption and Manufacturing of hybrid and Electric Vehicles (FAME) India to promote electric mobility adoption across segments and vehicle technologies. A uniform incentive of Rs 10,000 per kilowatt hour (kWh) of battery pack capacity would be extended to all-electric vehicles including plug-in hybrids (PHEVs) and strong hybrids, except for buses, as the cost of batteries is one of the main causes of difference in cost of hybrid/electric vehicles and internal combustion engine (ICE) vehicles. With this, it is estimated that the remaining extra cost of electric vehicles compared to equivalent ICE vehicles would be recovered in less than three years by way of operational savings.  Hybrid VehiclesEarlier government had withdrawn subsidies on hybrid vehicles and subsequently placed them under the highest tax slab of 28% under GST. An additional cess of 15% is applicable to such vehicles, taking total levies to 43%. Electric vehicles were taxed much lower at 12% to encourage carmakers to go all-electric by 2030. As per the proposed policy, an incentive of Rs.20,000 per KWh additionally has been determined for electric buses so that the cost differential with ICE buses could be recovered in a period of six years by way of operational savings. With the proposed reduction of subsidy in the FAME-II, the two-wheelers will become costlier by Rs. 11,000 to Rs. 15,000 as the subsidy will reduce to around Rs.11,000.  Earlier Electric two-wheelers with a speed of around 40-45 km per hour and a range of 60-70 km use only one lithium battery of around 1kWh and get a subsidy of Rs 22,000. Electric buses, electric, PHEV and strong hybrid four-wheelers, electric three-wheelers, including registered e-rickshaws, electric two-wheelers, and pedal assisted e-cycles will be eligible under FAME II. According to BlueWeave Consulting, Electric vehicles (EVs) are the inevitable future of the automotive industry. The demand for all-electric cars expected to increase in the near future. The electric vehicle market in India is anticipated to create lucrative opportunities for electric vehicle manufacturers as well as for vehicle component manufacturers in the near future. The new FAME II scheme is linking the incentives to the battery power – the higher the power, the higher the incentive. With an outlay of Rs 5,500 crore in its second phase, the scheme will offer a range of incentives, such as exemption from paying road tax, registration fee and parking charges for various categories of electric and strong hybrid vehicles. The FAME scheme is part of the government’s National Electric Mobility Mission Plan (NEMMP) that envisages that a third of the automobiles sold in India will be electric vehicles by 2030. The second phase of the scheme, however, may end up disappointing manufacturers of electric two-wheelers as it envisages linking the incentives they would enjoy to the battery power. The ministry also proposes to give additional financial assistance shall be provided towards the purchase of charging equipment up to 10% of total eligible demand incentive for the purchase of a fleet of EV buses as per the contract agreement between purchaser and OEM/manufacturer/supplier to State Transport Undertakings / Municipal Corporations. However, the cities should have a larger vision to curb dependence on fossil fuel and reduce CO2 emissions. It is right time that public transport vehicles shift their source of power from diesel to electricity. According to the recently published report by BlueWeave Consulting on “Global Electric Commercial Vehicles Market by Propulsion type (BEV, HEV, PHEV, FCEV), by Vehicle type (Bus, Truck, Van, Others), by Component (Motor, Battery, Others) – Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2014-2024,” the Global Electric Commercial Vehicles market is projected to grow at a CAGR over 13.0% during the forecast period in terms of value. The market is expected to reach over USD149, 316 Mn by 2024, supported by government subsidies and tax rebates for commercial electric vehicles. Need for fuel-efficient and emission-free vehicles and the increasing demand for the electric commercial vehicle such as an electric truck in the logistics industry to minimize the additional liability of fuel expenses. Innovations in EV battery capacity, which will enable the electric commercial vehicle to carry heavy loads over a longer range, can create new revenue generation opportunities. According to the upcoming report by BlueWeave Consulting on “India Electric Commercial Vehicles Market by Propulsion type (BEV, HEV, PHEV, FCEV), by Vehicle type (Bus, Truck, Van, Others), by Component (Motor, Battery, Others) – Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2014-2024,” India Electric Vehicle is projected to grow over a forecast period. The demand for electric vehicles is governed by an increase in demand for fuel-efficient, high-performance, and low-emission vehicles. In addition, the trend of reduction in vehicular emission due to stringent rules & regulations in several states and the growth of public charging infrastructure in India are fuelling the market growth. According to the recently published report by BlueWeave Consulting on “Global Electric Vehicle Battery Market, by Battery Type (Lithium-ion Battery, Lead Acid Battery, Nickel Metal Hydride Battery, and Others), by Vehicle Technology (BEV, PHEV and HEV), by Vehicle Type (Passenger Car, Commercial Car and Two Wheeler), by Region (North America, Asia Pacific, Europe, Latin America, and Middle East & Africa); Size and Forecast, 2014-2025, Global Electric Vehicle Battery market is expected to grow with a CAGR over 19% during the forecast period 2018-2025, owing to increasing demand for environment-friendly vehicles. Diseases caused by air and water pollution are epidemic among minorities. Environmental pollution causes more than three times of death than malaria, tuberculosis, and AIDs, countries such as India and China records the maximum death caused by environmental pollution. Pollution causes 7% of the medical expenses among middle-income group people across the world. According to World Bank air pollution cost in India was approximately 8% of its GDP or USD 560 billion in 2013.  Hence, raising public awareness of air quality and the burden of disease caused by air pollution is an essential step in reducing air pollution and improving public health which is accelerating market demand for electric vehicles battery market.