Saffron clad chief evangelist may bring succour to Indian electric 2W industry

SMEV has described Kaul as being a prominent civil society and consumer activist and is well known for his role in federating civil society groups in the capital. Kaul has interests in the EV sector and believes strongly in the growth potential and importance of this sunrise industry for the nation. He is actively promoting international investments in the sector in India, SMEV stated in one of its releases.

SMEV also stated recently that it will go into voluntary hibernation to coincide with the appointment of Sanjay Kaul as Chief Evangelist. The move comes in the wake of the crisis in the EV sector since the last year with almost all OEMs in the sector dealing with issues of non-compliance with policy details.

Sohinder Gill, Director General,  SMEV said, “…the EV sector is under extreme stress at this current time….We welcome Mr Sanjay Kaul to help lead the industry at this hour of need. His acumen in trouble shooting will come handy even as he brings a lot of investor interest to the sector”.

The SMEV will suspend all operational actions until such time a new structure is fashioned under the guidance of Kaul, the association informed,

Several players in the industry had been accused of misusing the government subsidy under the Faster Adoption of Manufacturing of Electric Vehicles (FAME 2) scheme. 

As a result, the Indian government slashed the subsidies for electric two wheelers. FAME 2 was introduced by the government on April 1, 2019, for a period of three years, but was further extended for two years till March 31, 2024.

The total outlay for FAME 2 Scheme Phase II is Rs 10,000 crore to provide incentives to buyers. The scheme is exclusively for public and commercial transport and covers electric three-wheelers, electric four-wheelers and electric buses. The benefit of the incentive is also available to privately owned registered electric two-wheelers.

In May this year, the government slashed the subsidies for electric two wheelers, applicable from June 1, 2023, which has resulted in prices of registered electric two wheelers going up.  Earlier, the subsidy benefit was 40 per cent of ex factory price, which was reduced to 15 per cent.  That left the Indian electric 2 wheeler industry in a shock, especially those players whose bread and butter are only electric two wheelers. Players like TVS, Bajaj, Hero MotoCorp, etc are not too worried about subsidies, as a majority of their sales comes from vehicles powered by IC engines. But players like Hero Electric, Ather, Ola Electric, Greaves Cotton that make only electric two wheelers are a worried lot.

In the fiscal 2022-23, more than 779,000 high speed electric two wheelers were sold across India, which received FAME 2 subsidy. According to the Federation of Automobile Dealers Associations (FADA) whose vehicle retail data is collated in collaboration with Ministry of Road Transport & Highways, Government of India and is gathered from 1,351 out of 1,437 RTOs in the country, Ola Electric is the largest electric two wheeler player in the country. In the fiscal  2022-23, the company sold around 1,52,542 electric two wheelers in the country, followed by Okinawa Autotech with 94,626 units, Hero Electric with 88,591 units, Ampere Vehicles with 84,551 units and Ather Energy with 76,833 units.

Incidentally Ola Electric was the only player that averaged more than 10,000 units sales every month, the rest falling much below the 10,000 units level. Now that the government has cut subsidies on electric two wheelers, the demand for electric two- wheelers is likely to peter out.

FADA annual sales figures of electric two wheelers:

The last two months have seen SMEV sending out all kinds of SOS to the government to help its players.

The month of June 2023 saw SMEV sending out several SOS to the government to give the electric two wheeler industry a level playing field. Early June, it called upon the Government to levy an additional Green Tax on ICE vehicles to incentivise EV adoption and support reduction of pollution creating crude oil imports. The SMEV believed that an increase in taxes to the tune of 100 basis points on traditional polluting ICE 2-wheelers will be required to fund subsidies for electric 2-wheeler vehicles and put the FAME scheme back on track.

SMEV then wrote to the Minister of Finance, Government of India, proposing the creation of Rs 3000 Cr Rehabilitation Fund to revive and sustain operations of OEMs which have been badly affected by the recent FAME subsidy blocks.

SMEV maintained that the total amount of subsidies withheld and still due to various E2W OEMs amount to over Rs 1200 crore. The industry has been awaiting the funds for over 18 months exclusive of the interest.

After this, the society requested for NGT’s support to a Green Tax on fuel-based two-wheelers so as to incentivise the adoption of green vehicles and contribute to the national objective of environmental preservation and pollution reduction.

By mid June, the society petitioned the Niti Aayog to reiterate that the implosion of FAME 2 policy, in a series of detrimental actions since last year has contaminated the ambitious national E-Mobility charter resulting in a complete regression of its objectives.

The Ministry of Heavy Industries’ actions over the past 18 months i.e., withholding subsidies, demanding retrospective claw backs of subsidy given in 2019, delisting companies from NAB portal and now its latest move to slash subsidies, is likely to impact sales and substantially delay the process of EV adoption and penetration in the country, the body pointed out.

A few days later, the association reached out to Minister of Commerce and Industry Piyush Goyal wherein it sought support for the EV industry facing embargo on utilisation of FAME subsidy through official NAB portal pending resolution of Rs. 1200 cores worth of outstanding subsidy owed by Ministry of Heavy Industries (MHI) and other impediments imposed on the industry.

Now as a last resort move, SMEV has brought in Sanjay Kaul to resolve some of its pending critical issues. Maybe, finally after the several SOS, this move may finally bring in the much needed solution. Maybe, the saffron connection works!