Business & Finance
Businesses shift focus to high-end market, increase prices following FAME subsidy expiration
The Faster Adoption and Manufacturing of Hybrid and Electric Vehicle (FAME-II) subsidy is set to expire on March 31, prompting electric vehicle companies to shift focus to the premium vehicle segment and raise prices by up to 25 per cent. Automakers are hopeful for an extension of the subsidy but are preparing for a potential dip in sales if the Centre does not grant their request.
The discontinuation of FAME-II subsidies presents challenges for EV players and introduces the risk of a sudden 25 per cent surge in EV prices, which could discourage consumers from embracing electric vehicles. This situation could potentially reverse the positive demand trajectory and disrupt investments from manufacturers, component makers, and charging infrastructure companies, impeding the overall growth of the EV sector and hindering the progress of the ‘Make in India’ initiative.
The Union government recently increased the financial outlay of the FAME scheme to ₹11,500 crore, which was initially rolled out in 2019 for three years with an outlay of ₹10,500 crore and extended up to March 2024. Electric vehicle players believe that the electric vehicle penetration in the country will be affected by increased competition and price wars if the subsidy is not extended.
Electric vehicle manufacturers are facing the challenge of focusing on cost reduction initiatives and capitalizing on the premium segment where consumers are less price conscious and net profits are higher. The discontinuation of the subsidy could adversely affect overall sales and profit margins in the industry.
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