Electric 2-wheeler companies hit a Rs 1,000 crore bump

Sales and production of electric two-wheelers are set to take a hit just when the demand was rising, with the government stalling subsidy disbursal amounting to ₹1,000 crore to half a dozen companies including Hero Electric and Okinawa Autotech.

Subsidy payments were to be made under FAME-II (Faster Adoption and Manufacturing of Electric Vehicles) initiative, the government's flagship incentive scheme aimed at boosting manufacturing and sales of electric vehicles (EV). But the payments have stopped since April 2022 due to alleged violations of local value addition criteria under the scheme.

358,318 Units Sold in 7 Mths

Revolt, Okoye, Ampere and Jitendra EV are the other affected companies, the industry sources said.

Even as a probe is underway to ascertain these irregularities, companies said the stoppage of payouts - already passed on to the customers on sale of vehicles - is hurting cash flows and stands to disrupt operations in the industry. If the payments don't resume, sales of electric two-wheelers may miss the one million mark projected at the start of the year and affect expansion plans of the manufacturers, said the company executives.

Sales of electric two-wheelers stood at 358,318 units in the first seven months of the financial year, shows data available on Vahan portal of the ministry of road, transport & highways (MoRTH). To be sure, sales of electric two-wheelers till October are higher by about 55% over 231,378 units sold in the whole of the last financial year, but are about a third of the targeted sales of 1 million units in FY23.

Electric two-wheeler sales have been inching up in the last one year after the government revised upwards incentives under FAME-II.

Incentives Passed On to Buyers

"The industry had anticipated that it may cross 1 million units in sales this fiscal. However, only 358,318 units have been sold till October 2022. The vehicles sold by the affected companies are all mass market models, priced around Rs 80,000. With incentives on these products on hold, the gap in achieving targets may broaden further," said a senior industry executive on the condition of anonymity.

The executive added, "In addition to the subsidy related issues of around 70,000 vehicles last fiscal year, the subsidy on around 1.85 lakh vehicles that has already been passed on to the customers in the current financial year has not been reimbursed to the OEMs."

The government provides an incentive of Rs 15,000 per kWh on electric two-wheelers, capped at 40% of the total vehicle cost, provided they meet specified localisation criteria. The incentive is given to customers and reimbursed to original equipment manufacturers (OEMs) by the government on submitting proof of sale within 45-90 days.

'No Intent to Penalise EV Cos'

The government officials said the intent was not to penalise electric vehicle makers but to promote development of the EV ecosystem in the country. "We do not want to penalise any company. We have only said that once it is proven that they have met the localisation criteria while availing of incentives, we will release the payments," a senior official in the ministry of heavy industries told ET, adding in instances where any company failed to meet the required localisation criteria, it should not have availed of the subsidies.