The Society of Manufacturers of Electric Vehicles (SMEV), a trade association that represents the Indian EV market, publishes its annual report summarising the EV sector’s performance for the fiscal year 2022–2023 (Apr–Mar). In FY 2023, the sector reported selling 1152021 electric vehicles, including E-Buses, E-Cars, E-Three-wheelers, as well as E-two-wheelers.
120,000 low-speed (LS) electric scooters, 285,443 LS electric rickshaws, and over 50,000 LS electric bicycles have been sold in FY23, according to statistics obtained from manufacturers.
The business sold 7,26,976 high-speed electric two-wheelers (E2W) with a top speed of 25 km/h in FY 2023.
However, the adoption of E2W decreased month after month, ultimately falling more than 25% short of the minimum target established by Niti Aayog and other research organisations annually.
Although the market has made tremendous strides recently towards a more environmentally conscious and sustainable future, stakeholders and industry experts are worried that the growth in E2W adoption slowed down following the Indian festival season. Ironically, it wasn’t the demand from the public that caused the unexpected withdrawal in excess of than the Rs. 1200 crore in subsidies that a majority of OEMs had already passed on to the public under the pretence of a delay in localization. Due to allegations of under billing to get around FAME regulations, another Rs. 400 cr of OEMs functioning in the premium segment also got blocked, hampering their company’s operations due to a severe lack of working capital. In order to plan their enterprises for the year FY24, 16 companies, representing over 95% of the industry, are currently awaiting a resolution to the disarray and debacle of the FAME PMP.
Speaking on the progress of the E2W sector, Sohinder Gill, DG SMEV, said, “Over the years, the E2W sector has been catching up and working tirelessly towards realising the country’s aim of mostly transitioning to electric. While all of the earlier programmes since 2015 had little impact on EV adoption, the revamped FAME2 programme in late 202, which reduced the cost of E2W by about 35%, had a significant impact. Due to the extremely low volume of E2WS, the component supply chain had previously avoided anything related to it. It was not until the end of 2021 that suppliers began lining up to OEMs to express their interest in producing EV components. Most of these providers took the standard amount of time to localize—12 to 18 months—and are now beginning to set up adequate capacity.
For reasons that are best known to them, certain individuals with malice inclination launched a campaign to immediately put an end to this dream run. These people must be celebrating the full failure of India’s EV mission by pressuring policymakers to adopt a “black or white” stance on the issue rather than a flexible approach to implementation owing to circumstances beyond their control. The EV ambition of 80% acceptance by 2030 looks to be more of a fantasy with only 5% penetration in FY23, the short-term goal of 30%, and the adoption rate in FY23.
There is yet hope, and starting on April 23 the PMP eligibility requirements will be aggressively enforced. This will help the industry get back on track. The following are some of the most crucial elements to consider in order to boost the EV ecosystem right away:
Distribution Chain
One of the main issues in the supply chain is the lack of adequate local production capability for vital parts like batteries and motors. During COVID, supply chain disruptions made it extremely difficult for the sector to locate high-quality components. There are several ecosystem players who have made substantial contributions to the development of a sustainable and efficient supply chain. SMEV is happy to announce that the industry has decreased its reliance on imports as well is now independent, with most of its components being manufactured domestically.
FAME Initiative
The market is eagerly awaiting clarity on the government’s decision to continue FAME as it will determine the future of the entire industry. It is challenging for the players to create a long-term strategy due to the uncertainty among them. Any sudden drop in subsidies could jeopardise the government’s ambition for e-mobility and have a severe impact on the economic trajectory. It will surely have a negative impact and might wipe out a significant chunk of the market. It is essential to extend the FAME programme for at least 3–4 years in order to promote the growth of the ecosystem of electric vehicles and make it self-sustaining.
Subsidies should be gradually reduced after reaching a specific threshold because SMEV recognises that they cannot be a long-term sustainable solution. For instance, the government may decide to stop providing subsidies if 25% of two-wheelers are electric. SMEV firmly supports the “polluter pays” approach, where a cess is placed on the sale of every ICE car to provide a fund for promoting green vehicles so lessening the load, understanding the demand on the exchequer caused by the many initiatives conducted by the government.
Mechanism of Subsidies
Currently, the producers give the subsidy to the buyer and then recoup it back from the government after the transaction. The current process lacks transparency, which could encourage OEMs to manipulate sales in order to falsely claim the subsidy. The development of a direct subsidy structure that enables incentives to be promptly distributed to customers by the Government in order to eliminate any discrepancies is advised by SMEV.
PLI system
SMEV applauds the PLI programme for vehicles and components’ revision, which now allows MSMEs and startups to participate in the programme. For pure-play EV businesses, it will level the playing field and let them compete with other participants.
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