The FAME scheme: Accelerating change in India’s two-wheeler industry

The current reality is that India’s transport sector is heavily reliant on fossil fuels (India’s transport sector is responsible for 13.5% of India’s energy-related carbon dioxide emissions), and the year-on-year increase in India’s transport market, driven by urbanization and population and economic growth, has led to a corresponding increase in the import of crude oil.

This excessive dependence on imported fuel does not bode well for the Indian automotive industry and its stakeholders (essentially, all Indian citizens), as the consumption of fossil fuels has several adverse effects.

The environment gets polluted, the economy is affected because of high export expenses, and, ultimately, India is unable to progress toward its core goals of self-reliance and sustainability. Therefore, the FAME scheme offers a golden opportunity to promote the adoption of electric and hybrid vehicles in India, with the ultimate goal of reducing the country’s dependence on fossil fuels, curtailing air pollution, and mitigating the impact of climate change.

The Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme was launched in 2015 by the Ministry of Heavy Industries and Public Enterprises as part of the National Electric Mobility Mission Plan in a bid to increase the penetration of hybrid and electric vehicles (EVs) in India. With the objective of converting at least 30% of total transportation into EVs by 2030, the scheme has emerged as an advantageous solution to support the development of the EV market and manufacturing ecosystem (which, unfortunately, is still in its juvenescence), kindle change in India’s automotive industry, and ensure that India is right on track to achieving its goal of net-zero carbon emissions by 2070.

Consumers already have a positive mindset toward and a high level of awareness of electric mobility, majorly contributed to by the rise in the prices of petrol and diesel. Therefore, the incentives of the FAME scheme, when they trickle down to the consumers, can drastically increase the penetration and adoption of electric two-wheelers. The FAME scheme addresses the two major concerns of consumers regarding the purchase and use of two-wheeler EVs: cost and feasibility. Subsidies are provided on the manufacturing cost of the vehicle, which is mainly dependent on the cost of the battery.

This, along with other incentives, when passed down to the consumers, will increase their propensity to purchase. In terms of feasibility, the establishment of a robust charging station network (FAME II aims to build 2700 charging stations in several metros, smart cities, and hilly regions across the country) is sure to inspire confidence among consumers. In March 2023, the Centre sanctioned Rs 800 crores under phase II of the FAME scheme for the establishment of fast charging public stations. With the active participation of public sector units and private players, this amount might increase.

The FAME scheme will also provide a major fillip to India’s target of achieving self-reliance. The FAME scheme’s incentives to original equipment manufacturers (OEMs) will help enhance domestic manufacturing capacity and technology, thereby reducing the import of EV components. The FAME scheme has ushered in new faces in the two-wheeler EV manufacturing space, and even established players have started taking an interest. Several startups have established manufacturing units and are on the path to expanding their national footprint. Ambitious plans have been announced and then taken to fruition, often due to the benefits of the FAME scheme.Initiatives such as the FAME scheme are, thus, the need of the hour. Among the various categories of vehicles in India, two-wheelers have always led in terms of growth and penetration because of their comparative affordability and convenience. As EVs are the future of the mobility space, efforts should be made to bring about an equally high level of penetration of electric-powered two-wheelers in the market. Accordingly, the Indian government has been taking steps in this path.

Besides the FAME scheme, in 2021, the government approved a production-linked incentive (PLI) scheme for the manufacturing of advanced chemistry cells (ACCs) to lower the prices of electric batteries. Additionally, the GST on electric vehicles was reduced from 12% to 5% and on chargers/charging stations from 18% to 5%. Together, such policies can arouse a paradigm shift in the ecosystem regarding the use of renewable energy, the indigenisation of manufacturing, and consumers’ acceptance of new and novel technology.

The writer is Co-Founder and Chief Technology Officer of DriveX.

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