India Expected To Reduce Electric Vehicle Subsidies Soon

In most countries across the globe, governments are giving sizable subsidies to folks who purchase electric vehicles, two-wheelers included. Obviously, this is to encourage more and more people to make the so-called "green shift." That being said, with more and more electric vehicles already on the road, some countries are beginning to roll back on the subsidies.

One such country is India, where it's expected that government subsidies for electric vehicles will soon be reduced, ultimately resulting in a more expensive purchase price on the part of the end-users. At present, India has what's called the FAME II subsidy, or the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles. Now on its second leg – hence the "II" in the name – the program consists of a Rs 15,000 ($181) subsidy per kilowatt-hour of battery capacity on electric two-wheelers. Ultimately, the total subsidy caps out at 40 percent of the vehicle's value. 

In the coming weeks and months, the subsidy is expected to be rolled back from Rs 15,000 per kilowatt-hour to Rs 10,000 ($121) per kilowatt hour. On top of all that, the subsidy limit is foreseen to drop to a maximum of 15 percent, as against the previous 40 percent.

An article by the Economic Times suggests that a major contributing factor to the reduced subsidies is that EV makers haven't been sourcing production within India as much as the government would have liked. Yes, apart from accelerating the adoption of EVs and hybrids, FAME II's goal is also to boost the Indian manufacturing industry by promoting made-in-India vehicles – something that manufacturers have apparently been struggling with lately. 

As for the impact to the vast majority of people who rely on two-wheelers to get around, well, they could soon be in for a shock as they'll be required to pay more for an electric two-wheeler. BikeWale gives us a good example with the popular Ather 450X. At present, the scooter carries a showroom price of Rs 128,000 ($1,544) thanks to the ongoing subsidy. Should the changes come into effect, the price could rise by as much as Rs 18,500 ($223). While this may not seem like much, it's important to remember that the Indian market is extremely price sensitive. That said, a price increase of this magnitude could dramatically affect sales figures.