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PluginIndia Electric Vehicles

FAME 2 Scheme for Electric Mobility : Analysis

20/3/2019

15 Comments

 
By Kamlesh Mallick with inputs from Industry
Picture
The FAME 2 (Faster Adoption and Manufacturing of Electric Vehicles in India) salient features were announced this month. The general direction of FAME 2 is positive in terms of demand side incentives for two wheelers, public transport and fleets.
While the EV community is aghast, that private electric cars ​are excluded from the scheme, there were more important questions regarding battery manufacturing that needed answering and even those have been answered.
In this blog, we talk about the FAME 2 scheme and also look at mandates for local battery pack, components and cell manufacturing in India.
Background
In order to promote manufacturing of electric vehicle technology and to ensure sustainable growth of the same, the Department of Heavy Industry  implemented the FAME-India Scheme Phase-I [Faster Adoption and Manufacturing of Electric Vehicles in India] from 1st April 2015. The scheme, which was initially upto 31st April 2017, and it had been extended upto 31st March, 2019.  

The salient features of Phase-II of the FAME India Scheme, called the FAME 2, was announced in first week of March 2019, which proposes to give a push to electric vehicles (EVs) in public transport and seeks to encourage adoption of EV's by way of market creation and demand aggregation.

The Total outlay of for FAME 1, was around 795 Crore to Rs. 895 Crore and the total fund requirement for FAME 2 is Rs 10,000 Crore over three years from 2019-20 to 2021-22 supporting 10 Lakh electric 2 wheelers, 5 Lakh 3 wheelers, 55,000 commercial/fleet electric cars and 7000 Electric Buses.

Salient features of FAME 2
The objectives are to
  • Create Demand for EV’s by offering incentives
  • Create EV charging infrastructure
  • Have special emphasis for public transport, especially Electric Buses
  • 3 Wheeler and 4 Wheeler, incentives will only be applicable for commercial purposes
  • 2 Wheeler segment will have focus for private vehicles
  • 2700 charging station in metros in the next 3 years
  • ​Establishment of charging stations in major highways

No incentives for Privately Owned Electric Cars
The biggest talking point here is that there is no incentive for individuals buying private electric cars. People are asking us this question almost everyday.
Our view is that it does not make a difference anyway. We have observed over the years Internal Combustion Engine based manufacturers have been inflating the price of electric cars.
This has resulted in fairly low volumes sold, as there is less demand for Electric Cars. The ICE manufacturers will continue operating in this mode, even after FAME 2 is implemented.

Our only worry is this might dent the confidence of honest electric car startups, who want to launch affordable Electric Cars.

We spoke to a CEO of an electric car startup company. He wished to remain anonymous and said the following -

“As far as my views on FAME 2 as CEO are, currently we are in a little precarious situation as the ruling is very clear on private owners of 2W getting subsidy and 4W owners not getting any. Our overall broad view has always been that we do not want to design a product with subsidy in mind. We are watching this space very closely and waiting for information.
My personal view is that; FAME 2 is well intentioned and given that India cannot be China and subsidize a whole EV industry, the steps are in the right direction with clear goal of cutting oil imports as much as possible. Could India have done better? We could, but India has a 100 other problems to deal with too. India is counting on its innovators and dreamers to drive the change rather than throw money at the problem.
As EV community, we should whole heartedly, support new ideas and solutions which will encourage more people to join in.”

The goal has to be make the EV industry self sustaining in the long term

The details of the FAME 2 scheme are still being worked out and they hope to have it ready by April 2019, we still have questions that need answering.
Offering demand side incentives is fantastic, but we feel that there has to be a clear policy in the following
  • Mention the structure of how the incentives will be distributed. Currently there is no incentive for the manufacturer to keep the sticker price of EV’s low. We have observed many manufacturers artificially inflate the price of an EV to ensure high margins in spite of the subsidy.
  • What if the scheme expires in 2023 and is not renewed? What is the scheme is pulled due to various reasons? Will this affect the EV industry?
  • What supply side incentives are provided to make Lithium Cells in India? Assume the industry sells 10 Lakh, two wheelers by 2023, each with an average battery capacity of 2 kWh. That would mean around 20 Lakh kWh worth of battery packs would have to be imported only for two wheelers. If by 2023, not even a single kWh is made in India, how will it affect the industry in 2023?
  • There are many companies importing cells from China and manufacturing battery packs, but unless cells are themselves made in India, it will lead to the same situation that occured in 2012.

We have to learn from the past
​
​
Back in 2010, the then UPA government launched the MNRE scheme which offered incentives for consumers for EV’s. Due to the introduction of the policy, EV industry saw 200 per cent growth in its sales. The organised players saw a huge growth in the market share.
But on March 31, 2012, the MNRE scheme was withdrawn which resulted in over 70 per cent fall in EV sales. Manufacturers faced closure of dealerships, with around 250 dealers having closed their operations within 3 months of the announcement.
This horrific scenario should never be allowed to happen. By 2023, the industry must continue to thrive without government schemes or support.

The government seems to have answered this crucial answer of battery manufacturing too, by creating the National Mission on Transformative Mobility and Storage to encourage drive clean, connected, shared, sustainable and holistic mobility initiatives.
The scheme encourages the following
  • Phased Manufacturing Programme (PMP) valid for 5 years till 2024 to support setting up of a few large-scale, export-competitive integrated batteries and cell-manufacturing Giga plants in India.
  • A phased roadmap to implement battery manufacturing at Giga-scale will be considered with initial focus on large-scale module and pack assembly plants by 2019-20, followed by integrated cell manufacturing by 2021-22.
  • Each phase of localisation will be finalised by the Mission with a clear Make in India strategy for the electric vehicle components as well as battery.
Read more about the National Mission on Transformative Mobility and Storage. The link is in the description below.

Other Perspectives from Prof. Ashok Jhunjhunwala (IIT Madras, India)

FAME 2 is a step in the right direction. But there are shortcomings. You have pointed out some. I will add:

  • The incentives based on size of battery is misplaced. This means a more efficient vehicle, which uses smaller battery, gets less incentivised.
  • It is not clear what will happen when Swapping batteries, an important step recognised by most, is used.
  • Charging station subsidy: there is no attempt to define the business case for charging station. Subsidy is to bridge gap. What is the gap? For what kind of chargers? Will we set up chargers with no vehicles to use them
But overall it is is in positive direction. Some corrections will be needed after elections.

The proposed subsidy would be based on the battery capacity and that is Rs 10,000 per kWh
  • So a Mahindra e2o Plus with 11 kWh will get Rs 1,10,000 subsidy
  • A Hyundai Kona with say a 25 kWh battery pack will get Rs 2,50,000 subsidy
  • An Okinawa iPraise electric scooter with a 2.9 kWh will get Rs 29,000 subsidy
We understand where Prof. Jhunjhunwala is coming from, why should a small car that does so much by consuming less electricity and resources, be supported less while large SUV’s and other Sedans with large batteries that consume a lot more power be offered more subsidy?
On one hand, incentives based on battery pack size is a good idea. For example, this would encourage two wheeler manufacturers, add large battery packs for extended range, thus matching performance and range levels of ICE scooters.
But at the same time an Electric scooter say with a 1.4 kWh lithium battery pack under FAME 1 got around Rs 22,000 subsidy and now only will get Rs 14,000.
Also as Prof. Jhunjhunwala pointed out, there is less support for small electric cars that offer superior efficiency, as shown in the chart, which compares Indian Electric cars vs Global Electric Cars.
Picture

Final Words
The EV industry needs to be self sustaining pretty soon. Any withdrawal of incentives should not affect the industry like it did in 2012. The focus should be manufacturing Lithium cells and achieve a steady demand for EV’s over a long period of time.

​We congratulate the government for launching FAME 2 and National Mission on Transformative Mobility and Storage. This shows strong commitment towards electric mobility and refutes theories from people who say the government is not doing anything for EV’s.

We hope to do a part 2 episode once we have more details of the FAME 2 scheme

Finally, we thank Mr Rajit A. R. Arya, CEO of ARTEM for sharing his views on this.
Stay tuned!
15 Comments
Dr Kurian P J
25/3/2019 07:52:41 pm

Will I get subsidy if I buy e2o by March 31st 2019?

Reply
venugopalrao nellutla
21/4/2019 01:42:35 pm

Three thing's to check.
Lithium battery CELL AND PACKING with bms cost how it's going to be controlled?
Currently 1500 cycle and 2yrs warranty given by battery packers..but OEM has to give 3yrs warranty of veh with battery how?
Veh OEM to ensure 50% Local make and list of components given. Is component has to be made in India or sold by a Indian vendor.

Reply
Vinay link
28/5/2019 11:05:13 am

No one seems to be approaching the problem from first principles. People will buy an EV if (1) its total cost of ownership is less than petrol, and yes, that includes the cost of renting a wall mounted charger, or (2) it is so much better to drive or ride, and more beautiful (no radiator etc), than the incumbent. For this they should first incentivise 3rd party DC fast chargers (to charge a verito to 80% in <6min), and likewise 3rd party battery swap stations for 2W and 3W. If recurring costs are low, more people will ride EVs more often

Reply
Ramesh kumar link
28/5/2019 08:19:34 pm

Fame 2

Reply
Sachin Tayal link
2/8/2019 08:20:08 am

I am looking for dealership of electric charging stations...contact me at 9501255577

Reply
Muhammad khaseem
16/8/2019 11:26:46 am

Iam interested to put the charge station.how to apply.where apply.

Reply
Pratap Patil
2/12/2019 11:54:03 pm

Dear Friend,
Please mail us your requirements and your investment capacity. Also let us know where you want to start selling these ev chargers ?
Mail us on " evcoindia@gmail.com" Thanks,
Regards
Pratap Patil

Reply
Dipak Kumar Baglary
31/10/2019 10:37:34 am

I want

Reply
P Sivaprasad
17/12/2019 11:00:49 pm

Can any one provide clarification on Ownership Transfer policy of EVs

Reply
Meher link
16/1/2020 10:46:25 pm

Came to is really a good move for adoption of electric vehicles but why there is no mention of electric vehicle retrofitting, because buying a new vehicle is way too costly and if we actually think to buy a new electric vehicle it's all about light weight built quality and doesn't look safe instead I will retrofit my existing IC engine vehicle to electric

Reply
Electricians West Auckland link
18/6/2020 11:35:40 am

It’s interesting to read what other people thought about FAME 2 scheme for electric mobility: analysis and how it relates to them or their clients, as their perspective could possibly help you in the future. I love this blog; please keep updated us with such information. I never thought will get to visit this viperelectrical.co.nz oh, has some nice content for everyone.

Reply
Prashant
27/8/2020 08:36:04 am

Is FAME 2 applicable also for Retrofit? If yes,could you please guide to the official document where this is mentioned. Thank you.

Reply
uday kaipa
31/1/2021 10:55:00 am

No, Registered Manufactures can only avail it.

Reply
uday kaipa
31/1/2021 10:52:56 am

I don't understand, Why pureEv doesn't have FAME 2 Demand Incentives, while Revolt (soco copy) with china parts gets it.

Reply
Vybhav N
6/9/2021 10:26:04 pm

I own a Photon LP and i am planning to buy ola s1 will I be eligible for fame II subsidy

Reply

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