Electric 2-wheeler firms push for 12-18 months’ breather
The Society of Manufacturers of Electric Vehicles (SMEV) — the association for electric vehicle makers — is petitioning the government to extend the deadline for reaching localisation requirements by another 12-18 months.
According to the association, the supply chain for electric two-wheelers has started to come into its own, but it will take 12-18 months for the capacity and capability of vendors to match the exponential growth of electric two-wheelers.
The government had fixed a localisation of 51 per cent of the cost of production of an electric two-wheeler as a key requirement for companies to be eligible under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India II (FAME II) subsidy scheme by April 2021.
The association has also suggested that rather than having a time frame for subsidies under the proposed FAME III, the government may consider linking subsidies to the volumes of electric twowheelers. Analyses show that the growth trajectory of electric two-wheelers can be sustained with tapered subsidies after they reach a conversion rate from internal combustion engine (ICE) to electric of around 20 per cent (currently, it is 5 per cent for two-wheelers). Since the outlay will be far higher than FAME II, it has suggested generating enough resources through the ‘green tax’ or the ‘polluters pay’ principle.
Sohinder Gill, director-general of SMEV, and global chief executive officer of Hero Electric, says, “Earlier volumes were so low that building a local supply chain was a challenge. Most suppliers were not interested. Now with volumes going up and economies of scale, electric two-wheeler companies and vendors are making investments. We are asking for around 12-18 months to reach the localisation norms. It can be done simultaneously with the launch of FAME III, for instance.”
The move is significant as the government has pulled up many electric two-wheeler makers for alleged violation of localisation norms and started withdrawing their subsidy, ranging between a substantial ~30,000 and ~50,000 per vehicle.
SMEV executives say at least two companies, Hero Electric and Okinawa, have been asked not to upload their vehicle sale data for eligibility under the subsidy scheme. This could adversely impact their sales in the months ahead if the matter is not settled soon.
According to SMEV, at least six of their members are being scrutinised and been asked for details. SMEV executives say that the problem has arisen as there was not enough data on the cost of production of electric two-wheelers. The government has had to reverse calculate the cost, based on its ex-factory price to arrive at a number. But calculating variables like profits is easier said than done. It has also earmarked the level of localisation from various components, making it even more onerous.the FAME II scheme had reserved ~8,596 crore as subsidy for the industry, which would be for a maximum of 1 million vehicles, and offering ~20,000 for every 1 kilowatt-hour of battery.
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