One of Modi's pet schemes comes to a screeching halt in April

NEW DELHI: Electric two-wheeler sales have ground to a halt this month as new norms requiring re-certification of all existing vehicles under FAME-II hit the availability of models in the market. The government wants to promote e-vehicles through FAME, or the Faster Adoption and Manufacturing of Electric Vehicles, to protect the environment.From the 20 or so lithium-ion battery powered electric twowheeler models available in the local market, the product range has shrunk drastically. From sales of 6,000 units in March, the number is now down to almost nil, according to some insiders. A manufacturer added that under the second phase of the FAME programme, the vehicles have become costlier, owing to a lower subsidy. Only lithium-ion battery electric two-wheelers are eligible for subsidy under FAME-II.“April was a washout,” said Society of Manufacturers of Electric Vehicles (SMEV) director general Sohinder Gill. “Only three models were certified by government agencies towards the end of the month. But there were no sales under FAME-II. In May too, the industry will end up selling a few hundred units… It is only in August that sales may gain some pace.”'NOT ENOUGH TIME TO COMPLY'Each OEM (original equipment manufacturer) is required to get its model certified from recognised testing agencies under Rule 126 of the Central Motor Vehicle Rules (CMVR), 1989, to be eligible under FAME India Scheme Phase-II. Once certified, electric two-wheelers get a subsidy of Rs 10,000 per kilowatt hour (kWh).The certification process by agencies such as Automotive Research Association of India (ARAI) typically takes two-three months, said manufacturers. With the government only notifying the scheme last month to come into effect on April 1, they had little time for re-certification. In addition to this, manufacturers also have to meet 50% localisation norms specified under the new scheme to get the subsidy.“We have not been given any time to meet the localisation norms and recertify vehicles,” said MH Reddy, chairman of manufacturer NDS Eco Motors. “There is no local base to procure from currently… Sales have come to a standstill.”If the industry had been given a year time to increase content localisation, demand would have remained unaffected, he said.“If we look at internal combustion engine vehicles, volumes are high, supplier chains are well established, prices therefore are reasonable,” Reddy said. “Even then they end up importing 15-20% of vehicle parts. Unless the domestic electric twowheeler industry reaches annual volumes of 1 million units, vendors will not have economies of scale to sell at competitive prices.”Electric two-wheeler manufacturers are required to have localisation content of 50% of the ex-factory price of all vehicles, except for buses, to avail of incentives under FAME-II. Batteries, motors and controllers for electric vehicles account for more than 50% of the ex-factory price, and all of these are currently being imported. “There are shortterm challenges over availability of components at competitive prices in the local market”, said Ayush Lohia, chief executive officer of another manufacturer, Lohia Auto Industries. “If the government were to give some visibility over the kind of volumes expected from electric vehicles beyond the specified three years, say for 5-10 years, it would become easier for vendors to make business plans and invest in such capital-intensive ventures.”Lohia Auto is working on the commercial launch of electric two-wheelers but says the timeline will depend on being able to meet government guidelines.Even when sales gain some pace next quarter, demand is expected to remain tepid as the government has slashed incentives under FAME-II.“Under FAME-I, the government extended uniform demand incentive of Rs 22,000 for electric two-wheelers,” said Gill, also chief executive officer at market leader Hero Electric. “Under the new scheme, vehicles have become costlier to the tune of Rs 10,000-12,000, increasing the gap with petrol-powered scooters. Indian consumers are price sensitive and are unlikely to pay a higher upfront purchase price for electric two-wheelers.”Gill said if the government was to offer the same subsidy as those accorded to buses—Rs 20,000 per kWh—it would help industry attract customers and attain critical mass, which in turn would trigger local manufacturing.In the current environment, however, the industry feels the Indian government’s aim to sell one million two-wheelers in the next three years will be difficult to achieve. Even without the challenges that have cropped up under FAME-II, only126,000 electric two-wheelers were sold in the local market in the last financial year.The automotive industry has suffered abrupt timelines in the past too, said AT Kearney auto analyst Rahul Mishra, principal (automotive practice), A T Kearney said. “This disruption could have been dampened by putting a sunset clause to the localisation requirement,” he said. “That said, there have been clear signs over the past 24 months that the intent is to move towards cleaner technologies, and manufacture more locally. The government can now ease the transition by phasing out the localisation requirements but even then there should be a defined time horizon in months and not years.”

from Economic Times http://bit.ly/2DFxDlr