In his remarks at the India EV Conclave, Eric Vas, President of Bajaj Auto’s electric vehicle division, emphasized the need for an overhaul of the current system of subsidies for electric two-wheelers. He maintained that demand patterns are distorted by the current system. Vas voiced his worries about subsidies being a dangerous and maybe destructive course for the sector. He argued that in order to promote a natural market equilibrium, subsidies should be eliminated.
Vas criticized the present FAME subsidy for encouraging undue development in one direction because it is based on battery size. He questioned the strategy’s efficacy, pointing out that it’s still too early to tell what its actual effects will be.
For electric two-wheelers, the FAME-II plan provides a demand subsidy of up to Rs 10,000 per kWh, with a cap of 15% of the vehicle’s ex-factory price. The prior incentive, which was Rs 15,000 per kWh with a 40% cost cap, has been replaced. This subsidy, however, only helps high-speed versions that satisfy specific speed and range requirements; it does not apply to low-speed two-wheelers.
Vas claims that because of this bias in subsidies favoring high-speed models, mainstream manufacturers have ignored other markets for electric scooters, like those for low-speed versions. He emphasized that Bajaj Auto has observed the slow expansion of unsubsidized low-speed electric scooters through its stake in Bengaluru-based Yulu, a shared electric mobility firm.
In addition, Vas suggested other incentives that he felt wouldn’t create distortions across other vehicle classifications, such as a GST holiday for the electric two-wheeler market. He underlined how urgently the subsidy mechanism needs to be redesigned for more intelligence.
For electric two-wheelers to continue growing, Vas believes that cutting costs and improving competitiveness are essential. He recognized that the present government subsidies, which include reduced road taxes and registration fees, lower GST, production-linked incentives, and advantages from the FAME initiative, account for about half of the cost of an electric two-wheeler. He did, however, raise concerns about the support’s long-term viability and emphasized the industry’s need to concentrate on cutting costs and boosting competition.
