World EV day: Will EVs survive without subsidy in India? – Electric Vehicles News

It’s a strange time where EV sales in developed Western markets of Europe and America have plateaued while developing markets like India continue to ascend, although very slowly.

For a long time now, electric vehicles (EV) have been considered as the long-term solution for mobility across the global market. The transition to battery-powered mobility has been a point of contention for the global automotive industry but something which seems inevitable. The Government of India for a decade now, has been a strong advocate of this transition and at the centre of this movement is Union Minister of Transport and Highways— Nitin Gadkari.

Gadkari has been very vocal about the Indian market not only adopting EVs at a mass level but also encouraging OEMs in India to locally manufacture EVs in the country, reducing dependency on foreign markets for imports to meet the demand. For this, a larger demand needed to be created so that buyers are lured towards cleaner battery-powered vehicles over traditional fossil fueled vehicles.

Through the implementation of the Faster Adoption of Manufacturing of Electric Vehicles (FAME) scheme, this transformative journey spurred significantly. Launched in 2015, FAME aimed to promote the adoption of EVs in India through incentives and subsidies. While FAME 1 provided initial thrust, it was FAME 2.0, introduced in 2019, that supercharged EV sales across various segments.

However, things took a significant turn earlier this year when several benefits provided to OEMs and buyers under the FAME 2.0 scheme were either scrapped completely or reduced. A couple of days ago, Gadkari asserted the Indian government’s subsidies are no longer necessary for electric vehicle (EV) manufacturers, thanks to the rapidly growing demand for EVs and alternative fuel vehicles like CNG. 

Addressing India Today Energy Summit
https://t.co/7erUGhKX2c

— Nitin Gadkari (@nitin_gadkari) September 6, 2024

His statement is also driven by declining battery costs and supportive tax policies, creating a favourable market environment. As a result, EV manufacturers in India have reached a point of sustainability, enabling them to thrive without relying on government subsidies. But does it paint a clear picture?

Impact of FAME 2.0 subsidies

FAME 2.0 significantly enhanced incentives for electric two-wheelers, three-wheelers, and four-wheelers. This resulted in a remarkable surge in EV sales, particularly in the two-wheeler segment. Companies like Ola Electric, Ather Energy, and Bajaj Auto capitalised on the scheme, launching innovative and affordable electric scooters that resonated with Indian consumers.

However, the withdrawal of FAME 2.0 incentives in March 2024 marked a turning point for the Indian EV market. While the government emphasised the need for industry maturity and self-sufficiency, the sudden withdrawal caught many stakeholders off guard. The immediate impact was a noticeable decline in EV sales across segments.

EV sales in India month-wise 2024 (Source: Vahan)

The figures shown in the table doesn’t provide any clear indication other than the fact that March was the highest-selling month for EVs across all segments in India which was also the last month of FAME 2.0 before the policy was heavily reworked. This probably indicates panic buying. Therefore, it is difficult to draw a conclusion if the withdrawal has actually impacted sales of EVs across segments.

Will (or can) EVs survive without subsidies?

So the burning question is whether or can EVs survive without subsidies in India for the longer run? At this point, it is difficult to predict anything since the market share for EVs in India is less than 10% and there is a long way to go before mass transition from internal combustion engines (ICE) vehicles to battery-powered vehicles starts happening at a high pace. However, the following two aspects should be noted before drawing any conclusions.

The withdrawal of FAME 2.0 had several implications:

• Increased Costs: Without subsidies, consumers faced higher upfront costs for EVs, making them less affordable for a price-sensitive market like India.
• Demand Slump: The sudden increase in prices dampened consumer demand, leading to a slowdown in sales for several EV manufacturers.
• Industry Challenges: The withdrawal posed challenges for the nascent EV ecosystem, including suppliers, charging infrastructure providers, and battery manufacturers.

Despite the setbacks, the Indian EV market has shown resilience. Several factors have contributed to a gradual recovery:

• State-Level Incentives: Many state governments have stepped in with their own EV policies and subsidies, partially offsetting the impact of FAME 2.0 withdrawal.
• Growing Awareness: Consumer awareness about the benefits of EVs, including reduced pollution and operating costs, continues to rise.
• Technological Advancements: Ongoing advancements in battery technology and charging infrastructure are making EVs more practical and convenient.

World EV Day: Industry Reactions

On the occasion of World EV Day, top executives from the industry have expressed their opinion about the growth and future of EVs in the country. Here are some of the notable reactions from the leadership of India’s auto Inc.

Manu Saxena, Senior Vice President, EV Business, TVS Motor Company said, “World EV Day is a powerful reminder of how far we’ve come and the exciting future that lies ahead in green mobility. India is poised to lead the world in electric vehicle innovation, driven by our strides toward ‘atma nirbhar’ design, engineering, and supply chain excellence.”

He further added that support from government initiatives such as FAME and EMPS is vital in fostering the EV sector’s growth. Coupled with the expanding charging infrastructure and strategic global reach, India is ready to emerge as a leading hub for electric two-wheeler exports.” 

Speaking on the same, Jyoti Malhotra, Managing Director, Volvo Car India said, “At Volvo Car India, we fully embrace this vision with our C40 Recharge and XC40 Recharge cars that deliver zero tailpipe emissions and use recyclable materials to reduce environmental impact.”

Shradha Suri Marwah, President, ACMA India said, “On World EV Day, we recognize the transformative role our auto component industry is playing in shaping India’s journey toward sustainable mobility. The transition to electric vehicles is more than just a technological shift—it is a redefinition of how we move, with a deep commitment to the environment. India’s auto component manufacturers are leading this charge, pioneering essential innovations in EV-specific components such as batteries and motors.

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