The Union Government recently increased the subsidy on electric 2-wheelers from Rs. 10,000 per KWh to Rs. 15,000 per kWh with an increased cap of 40% of the cost. Whether the increased subsidies spur sales in the electric segment remains to be seen. Here is a review of the numbers.
Recently, the Ministry of Heavy Industries and Public Enterprises announced revised subsidy rates for electric bikes and scooters in India under the new Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme which is known as the FAME-II Scheme. The scheme is aimed at promoting faster adoption and manufacturing of electric vehicles in the country. This announcement comes at a time when the country has started recovering from the second wave of the coronavirus pandemic with states gradually relaxing the lockdown restrictions. Both the first wave and second wave of the pandemic hit vehicle sales in the country. In this context, we look at the progress under the FAME Scheme so far and analyse the trends in the sale of electric vehicles in the country.
Countries are shifting to cleaner fuels
Across the globe, the past decade has witnessed the beginning of countries shifting from internal combustion engine (ICE) vehicles which are primarily dependent on fossil fuels to cleaner fuels. The beginning of this shift is following concerns over climate change, increase in energy costs, pollution, and depletion of fossil fuels. Electric mobility is considered a viable alternative to ICE which addresses economic challenges, rising urbanization, travel demand, and India’s energy security. However, these are still early days, and the adoption has been slow. The advent of appropriate technology, creation of adequate support infrastructure and introduction of innovative pricing solutions are necessary to boost electric mobility in India.
Phase I and II of FAME Scheme have been rolled out under NEMMP 2020
In 2012, the Union Government released the National Electric Mobility Mission Plan (NEMMP) 2020, the National Mission document providing the vision and the roadmap for the faster adoption of electric vehicles and their manufacturing in the country. The plan envisioned that by 2020, India would have a fleet of 6 to 7 million electric and hybrid vehicles. As part of the NEMMP 2020, the Department of Heavy Industry formulated the FAME India Scheme in the year 2015 to promote manufacturing of electric and hybrid vehicle technology and to ensure sustainable growth of the same. The Phase-I of the FAME India Scheme was initially launched for a period of 2 years, commencing from 01 April 2015, which was subsequently extended from time to time and the last extension was allowed up to 31 March 2019 with the total outlay of Rs. 895 crores.
From 01 April 2019, with total budgetary support of Rs. 10,000 crores, the Union Government notified Phase-II of FAME India Scheme. While the first phase was focused on Demand Creation, Technology Platform, Pilot Project, and Charging Infrastructure, the second phase mainly focuses on supporting electrification of public and shared transportation and aims to support, through demand incentive, about 7000 e-Buses, 5 lakh e-3 Wheelers, 55000 e-4 Wheeler Passenger Cars and 10 lakh e-2 Wheelers.
In the first phase of the scheme, about 2.8 lakh hybrid and electric vehicles were supported by way of demand incentives. Under Phase-II of the FAME India Scheme, about 77,680 Electric Vehicles have been supported as of 23 June 2021, as per the data on the Ministry’s website.
VAHAN dashboard provides data on electric vehicles registrations
The VAHAN dashboard provides data on the registration of vehicles from across the country including electric vehicles. Maintained by the Ministry of Road Transport & Highways (MoRTH), the VAHAN dashboard is a centralized database of registration of vehicles in 33 out of 37 states/UTs which are enrolled in VAHAN 4.0. The figures from Andhra Pradesh, Telangana, Lakshadweep, and Madhya Pradesh are not included here. The figures pertain to 1294 RTOs of the total 1497 RTOs in the country.
Electric vehicle registrations increased, but still very meagre of the overall numbers
Data from the VAHAN dashboard reveals that there has been a considerable increase in the number of electric vehicles registered in India since 2012. From less than 6,000 electric vehicles registered in 2012, the number dropped to less than half (2,433) electric vehicles in 2014. However, in 2015, the number of electric vehicles registered crossed 9,000 following the launch of the first phase of the FAME scheme. In the following year 2016, electric vehicle registration increased by nearly 5.7 times, crossing the 50,000 mark.
Since then, the registration of electric vehicles witnessed a steady growth up to 2019. In the four years between 2016 and 2019, the registration of electric vehicles tripled from 51,129 to more than 1.61 lakh vehicles. However, in 2020, the number dropped to 1.19 lakh electric vehicles, the lowest since 2018, indicating the impact of the COVID-19 pandemic. In 2021, as of 23 June 2020, more than 85,000 electric vehicles have been registered in India.
While the increase in numbers may be a positive sign, the electric vehicle numbers pale in insignificance when compared to overall vehicle registrations in the country. In 2019, the overall vehicle registrations in the country were over 2 crores while in 2020, it was more than 1.63 crores. In each of these two years, the number of electric vehicle registrations was less than 1% of all the vehicle registrations in India.
COVID-19 has affected the sales
The registration of electric vehicles in the months of April and May for both 2020 & 2021 indicate that the pandemic affected the sale of electric vehicles as well as it did with the entire automobile sector. Between 2017 and 2019, it is observed that there has been some sort of uniformity or a slight month-on-month increase/decrease in the registration of electric vehicles in the months from March to May. However, in 2020, the registrations dropped by 5.4% in March, 91.5% in April, and 87% in May. It was only in February 2021 that the registrations recovered and reached pre-COVID-19 levels. In March 2021, the number of registrations of electric vehicles reached a record 26,078 vehicles. However, in May 2021, the number dropped to 3310, the second-lowest monthly figure since 2017. Almost all the states in India went into localized lockdowns in May 2021 as the second wave of infections surged and the impact of such lockdowns was clearly visible even on the registration of electric vehicles.
2 & 3 Wheelers account for lion’s share of electric vehicles sold
Two-wheeler and three-wheeler electric vehicles account for lion’s share of electric vehicles registered in the country. Since 2016, these two categories constituted at least 96% of the electric vehicles registered in India. The categorization used here is as follows-
In 2019, both categories constituted almost 99% of all-electric vehicles registered. The numbers indicate that the registration of electric three-wheelers, which touched a record 1.3 lakhs in 2019 dropped by 33% in 2020. In the case of two-wheelers, the registrations had dropped by only 1.7% in 2020 as compared to 2019. As of 23 June 2021, the number of two-wheeler electric vehicles registered in 2021 has already surpassed the 2019 and 2020 levels. The registration of four-wheelers has also been increasing, though their share is low.
Three states account for 55% of electric vehicles registered since 2017
Between 01 January 2017 and 23 June 2021, over 5.85 lakh electric vehicles were registered in India and more than 2 lakh of those were registered in Uttar Pradesh (UP). The states of UP, Delhi, and Bihar alone account for more than 55% of the electric vehicles registered since 2017. More than 10,000 electric vehicles each were registered in 11 States/UTs during this period.
Like the overall trend, most states including UP, Bihar, West Bengal, Assam, Maharashtra, and Rajasthan reported a drop in registrations in 2020 following a continuous increase up to 2019. On the other hand, the states of Tamil Nadu, Karnataka, Tripura, Gujarat, and Kerala continued to report more registrations in 2020 than in 2019. Tamil Nadu has already registered more than 10,000 vehicles in 2021, almost twice the number in 2020. Gujarat and Kerala also have registered more electric vehicles in the first six months of 2021 than in the entire 2020. This varying trend across states is influenced by the respective states’ electric vehicle policies. For instance, the Delhi government offers a purchase incentive of up to Rs. 30,000/- per vehicle to the registered owner and Tamil Nadu offers 100% road tax exemption till 30 December 2022 in addition to waiver on registration charges.
New revised subsidy has been announced to boost sales
As COVID-19 has disrupted the entire automobile sector, it will be too early to assess the outcome of phase-2 of the FAME scheme and if it boosted sales. However, the goals under NEMMP 2020 have not been achieved yet.
Electric vehicles are expensive compared to traditional ICE vehicles and hence financial incentives are necessary to attract buyers. The revised subsidy under FAME-II for electric two-wheelers is Rs. 15,000 per KWh with an increased cap of 40% of the cost, up from Rs. 10,000 per kWh.
With lockdown restrictions being relaxed and economic activities resuming, it is anticipated that the demand for personal vehicles will increase. More people may want to avoid public transportation to avoid the risk of infection and the new increased subsidy can persuade people to purchase electric vehicles.
Many challenges remain
While the increase in subsidy may encourage sales, there are many challenges that need to be addressed such as the high cost of batteries, improvement of the battery technology, availability of raw materials, and electricity tariff policies. Accessibility of charging stations, availability of charging infrastructure, charging times will also play a significant role in the uptake of electric vehicles. While the financial incentives are necessary, they may not be sufficient to rapidly increase the electric vehicle adoption numbers unless all the challenges are parallelly addressed.
Featured Image: Electric Vehicle Registrations in India