India's electric two-wheeler manufacturer Hero Electric has appealed to the government to take a re-look at the government's FAME II scheme, or Faster Adoption and Manufacture of Electric (and Hybrid) Vehicles, since it has not helped low cost electric vehicles pick up sales, as that is the segment which contributes to maximum volumes in the electric vehicle category, and not premium electric vehicles. According to Hero Electric, while the FAME II scheme was aimed to promote adoption of electric vehicles, the government needs to include low speed two-wheelers, as these cost effective vehicles are essential for mass adoption of electric vehicles.
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"When FAME II was announced earlier this year, the industry had very high expectation from the government's vision and intention to make EVs more attractive to customers. However, in some areas FAME II was not very practical because of the multiple eligibility criteria vehicles (40 kmph minimum maximum top speed, 80 km range and more) would need to tick in order to come under the scheme. Hence, we feel there is still room for improvement, like giving Rs. 20,000 uniform subsidy that is accorded to the buses, and what even FAME I offered to customers. While the GST cut on EVs and electric chargers was a right move post the announcement of FAME II, increase in the localisation level to 50 per cent acted as a big hurdle for the manufacturers. As a result, right after FAME II was announced the vehicles sold under the policy was negligible and there were hardly any products that qualified for the scheme and the ones that did, were in the premium category," Hero Electric Managing Director Naveen Munjal said during an interaction with mediapersons recently.
Hero Electric has plans to invest Rs. 700 crore to ramp up production and invest in R&D and new products
Under the government's FAME I scheme, low speed electric vehicles with top speed of up to 25 kmph, including the likes of the electric bikes Hero Electric produces, had qualified for incentives of up to Rs. 17,000, while high speed electric vehicles qualified for incentives of up to Rs. 22,000. However, with the adoption of the FAME II scheme, which came into effect from April 1, 2019, electric two-wheelers are required to have a minimum range of 80 km on a full charge, and minimum top speed of 40 kmph to qualify for an incentive of Rs. 20,000. This has hit low speed electric vehicles which have been in the market before FAME II, and has adversely affected sales numbers.
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According to data released by the Society of Manufacturers of Electric Vehicles (SMEV), during the period from April to December, 2019, sales of FAME II qualified electric two-wheelers stood at just 3,000 units, compared to 48,671 units in the same period a year ago, when FAME I was in place.
"We believe that in order for EVs to see faster rate of adoption, first the affordable segment need to be taken care of. In the last 10 years, from over 500,000 plus electric two-wheelers sold in India, high speed models were able to attract only about 10 per cent buyers, this shows which segment is really contributing to the sales. This is also one of the major reasons, why we (Hero Electric) are focusing more in low-speed products. This year we launched a new product called the Dash, which contributed to our sales number immensely as the first stock got sold out within 3 months. So, we have seen the kind of response low-speed and affordable EV products enjoy. With the recent EV policy introduced by the Delhi government, we are confident that the future of battery operated electric vehicles in India looks promising," added Munjal.
In August 2019, Hero Electric had announced that the company was looking to invest around Rs. 700 crore in the next three years to ramp up production capacity of the company's electric scooters. Hero Electric had decided to strengthen its dealer network in Punjab, and to increase localisation levels, as well as invest in R&D and product development. The target was also to ramp up production capacity from the existing 100,000 units annually to 500,000 units annually.
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