Low-powered electric scooter sales in India may face demand headwinds

Avan Motors, an Indian electric vehicle startup, showcases its e-scooter models in New Delhi on March 22. The electric two-wheeler segment accounts for over 90 percent of India’s EVs.

By Atul Ranjan

NEW DELHI, NNA – The Indian government has cut cash incentives for buyers of low-powered electric scooters, threatening sales in the largest segment of the domestic EV market, and prompting some manufacturers to shift their focus toward producing more higher-powered models.

The new version of the Faster Adoption and Manufacturing of Electric Vehicles scheme known as FAME II took effect on April 1. Incentives are offered to buyers upfront in the form of a reduced price of EVs.

Under the new scheme, worth 100 billion rupees ($1.4 billion) in subsidies over three years, the discount increases in line with battery capacity, putting the low-powered e-bike segment at a disadvantage, according to the Society of Manufacturers of Electric Vehicles (SMEV), the industry lobby group.

FAME II provides a 10,000 rupees reduction ($145) per kilowatt-hour of a battery used in a two-wheeler. The vehicle must have a minimum top speed of 40 km per hour and have a range of at least 80 km when fully charged.

Under FAME I, the subsidy was not linked to battery capacity but was a flat rate of 22,000 rupees for lithium battery-powered electric two-wheelers.

“The problem with this scheme is that those existing electric two-wheelers which offer about the same speed of 35 to 40 km per hour and a range of around 60 km using a single battery capacity of over 1 kWh will only now get a subsidy of 10,000 rupees under the FAME II, far less than the 22,000 rupees they used to get under the FAME I,” Sohinder Gill, director general of SMEV, told NNA in an interview.

Nearly 53,000 of the roughly 55,000 electric two-wheelers sold in the fiscal year that ended in March 2018 were equipped with 1-kWh single batteries, he said.

India’s electric two-wheeler segment, which mainly comprises electric scooters with a maximum speed below 25km per hour, accounts for over 90 percent of electric vehicles on Indian roads.

With the new scheme determining the subsidy based on battery capacity and specifying the minimum criteria in terms of speed and range, two-wheelers may have to have a battery pack that can generate more than 1 kWh to appeal financially to prospective buyers.

But since the battery pack is one of the most expensive parts of an electric vehicle, the new scheme could in effect make low-powered e-scooters more expensive, Gill said.

“The price of a 1-kWh battery alone is around 25,000 rupees, on which you get 10,000-rupee subsidy as per the scheme,” he said.

A 2-kWh battery costs 50,000 rupees and a buyer will get 20,000 rupees in the new subsidy. “But then such relatively high-performance bikes are priced upwards of 100,000 rupees and have a very limited market,” Gill said, adding the electric two-wheeler industry as a whole may face demand headwinds.

Ninety-five percent of the electric two-wheeler models produced in India won’t be eligible for incentive under FAME II, according to the credit rating agency Crisil Ltd., a unit of Standard & Poor’s Financial Services LLC.

“EV makers have been caught off guard by the stringent eligibility criteria, leaving them no time to conform. They are expected to increase the battery size of their offerings for higher range and speed, improve battery technology in order to be eligible for the incentives,” Crisil said in a report released on Sunday.

Some of the EV manufacturers, however, believe that the government is right to focus on promoting high-performance electric two-wheelers in an effort to speed up the shift away from dependency on fossil fuels in the country.

“There may be a short-term impact on sales due to this new scheme,” said Jeetender Sharma, managing director of Okinawa Autotech Pvt. Ltd., a local manufacturer of e-scooters. “But from a long-term perspective, it’s good for the electric two-wheeler industry.”

“One of the reasons electric two-wheelers are finding it difficult to gain traction is because of their low performance compared to the conventional petrol-run two-wheelers,” Sharma told NNA. “Unless we introduce high-performance electric two wheelers, people will not shift to EVs in a big way.”

He said Okinawa plans to invest two billion rupees in the current fiscal year ending in March 2020 in research and development, product development and expansion of its network.

“We will continue to focus on high-speed electric two-wheelers,” Sharma said, referring to scooters and bikes capable of speeds of 60 to 70km per hour.

Another local manufacturer, Jitendra New EV Tech Pvt. Ltd, which produces electric two-and three-wheelers, has also lined up fresh investment as it looks to shift its focus to high capacity battery EVs .

“We are looking to invest four billion rupees in the next two years,” said Jitendra Shah, director of the company. “We have already stopped producing low-speed EVs, and are focusing on high-performance EVs.”

NNA Report

NNA Headlines

NNA VIDEO