Sudden Reduction of FAME Subsidy Impacts Ather’s Growth Trajectory: CEO Tarun Mehta Speaks Out

Tarun Mehta, CEO of Ather Energy, has expressed concerns about the abrupt reduction of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) subsidy, stating that its continuation is crucial for sustained growth in the electric two-wheeler industry. Mehta believes that a sudden cut in subsidies has already set Ather Energy’s growth back by a year, and discontinuing the subsidy in March could potentially hinder the industry’s progress for another one or two years.

Sudden Reduction of FAME Subsidy Challenges Faced by Ather Energy:

Speaking at the 10th Global Summit of Vibrant Gujarat, Mehta revealed that Ather Energy concluded the calendar year 2023 with the same volume as the beginning of the year. However, due to an unexpected reduction in subsidies, the company missed its growth target, losing a significant opportunity to double its volume. Mehta emphasized that this setback has cost Ather Energy an entire year of growth.

FAME-II Scheme Overview:

The FAME-II scheme, initially allocated Rs 10,000 crore and set to conclude in 2022, was extended till March 2024. In June 2023, the government reduced the subsidy for electric two-wheelers from Rs 15,000 to Rs 10,000 per kWh and capped incentives for a two-wheeler’s ex-factory price at 15 percent, down from 40 percent. Despite a subsequent revision of the scheme outlay for electric two-wheelers to Rs 3,500 crore from Rs 2,000 crore, the industry faced unexpected challenges.

CEO’s Perspective on Subsidy Continuation:

Mehta emphasized that the electric vehicle industry is no longer entirely dependent on subsidies for survival but acknowledged the need for a gradual phasing-out approach. He cautioned that if subsidies are halted abruptly in April, it could lead to one or two more years of stagnation, hampering the industry’s growth trajectory.

Industry Voices for Subsidy Extension:

Sullaja Firodia Motwani, Vice Chairperson of Kinetic Green and Chairperson of FICCI’s Mobility Forum, echoed Mehta’s sentiments, stating that demand incentives should persist for at least five more years until electric vehicle market share reaches 20-25 percent. Motwani emphasized that achieving this penetration level would create momentum, allowing the sector to stand independently without external support.

FAQs: (Frequently asked Questions) 

1. What is FAME-II?
   FAME-II stands for Faster Adoption and Manufacturing of Hybrid and Electric Vehicles Phase II, a government initiative to promote electric vehicles in India.

2. Why did the government reduce the FAME-II subsidy in June 2023?
   The subsidy reduction was attributed to the exhaustion of funds allocated for the two-wheeler segment.

3. How has Ather Energy been affected by the subsidy reduction?
   Ather Energy’s CEO, Tarun Mehta, stated that the sudden reduction has set the company’s growth back by a year.

4. What were the changes made to the FAME-II scheme in June 2023?
   The government reduced the subsidy for electric two-wheelers and capped incentives for ex-factory prices to 15 percent.

5. Why does Tarun Mehta believe subsidies are still necessary for the industry?
   While the industry is evolving, Mehta believes a sudden subsidy discontinuation could lead to one or two more years of stagnation.

6. What is Sullaja Firodia Motwani’s perspective on demand incentives?
   Motwani suggests that demand incentives should continue for at least five years until the electric vehicle market share reaches 20-25 percent.

7. How does Ather Energy plan to overcome the challenges posed by subsidy reductions?
   Ather Energy will tighten its belts and work hard, but Mehta anticipates one or two more years of industry stagnation if subsidies are discontinued abruptly.

8. What is the current market share of electric vehicles in India?
   The exact market share may vary, but industry experts suggest it is below the desired 20-25 percent for a self-sustaining sector.

9. Is the electric vehicle industry entirely dependent on subsidies?
   Tarun Mehta acknowledges that the industry is evolving, and while not entirely dependent, a gradual phasing-out approach for subsidies is crucial.

10. What is the future outlook for the electric two-wheeler industry in India?
    The industry’s growth trajectory is uncertain, with concerns raised about potential stagnation if subsidies are discontinued abruptly.

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