Electric scooters to get costlier with onset of new subsidy from April 1

Investment Information and Credit Rating Agency of India Limited (ICRA), a leading rating agency, reveals that the recently announced Electric Mobility Promotion Scheme 2024 (EMPS) by the Indian government, will result in a significant rise in initial purchase cost for electric bikes and scooters. This scheme, aimed at promoting electric vehicle adoption, will see a reduction in subsidies, leading to a 10 percent increase in costs for electric two wheelers when compared to the previous FAME 2 scheme, which will end on March 31.

1. Electric Mobility Promotion Scheme is valid from April 1 to July 31
2. Agency reports 5 percent increase of electric two wheelers in overall industry

Electric Mobility Promotion Scheme: how it affects the prices of e-scooters

The Electric Mobility Promotion Scheme 2024, introduced by the Ministry of Heavy Industries, Government of India, allocates a total outlay of Rs 500 crore to support the adoption of electric two and three wheelers for a four-month period – April 1 to July 31. Under the scheme, the subsidy for electric two wheelers has been reduced to Rs 5,000/kWh from Rs 10,000/kWh, with a maximum benefit of Rs 10,000 per vehicle. However, ICRA notes that around two-thirds of the outlay earmarked for electric two-wheelers will result in increased initial purchase costs. This would make the electric two wheelers over 70 percent costlier than the ICE-powered two wheelers.

ICRA estimates also suggest that the payback period for electric two wheelers could extend to 5.5 years when compared to five years under FAME 2 framework. This is assuming that electric two-wheeler manufacturers pass on the subsidy reduction to consumers through price hikes. Despite this, the long-term prospects for the electric two-wheeler segment remains promising, driven by the improved ownership costs when compared to ICE vehicles, added safety and extended range.

The government’s focus on promoting electric vehicles through initiatives like the Production Linked Incentive (PLI) scheme is also expected to boost electric vehicle adoption in the medium term. ICRA predicts that the penetration of electric two-wheelers in the overall industry will increase to 6-8 percent by 2025, up from approximately 5 percent currently.