Will electric cars miss out on incentives in Fame III?

The government instead plans to support more electric buses in the scheme, especially inter-city e-buses, which were previously not covered in its e-bus programme PM e-bus seva, and also in the tenders issued under CESL's (Convergence Energy Services Limited) grand challenge.

The plan is also to incentivize electric trucks as a new segment under Fame-III, besides electric two-wheelers and three-wheelers. Fame is short for faster adoption and manufacturing of electric and hybrid vehicles in India, and has seen two editions earlier, Fame-I and Fame-II.

Tata Motors, the largest beneficiary in Fame-II, has made a renewed pitch for the inclusion of e-four-wheelers under Fame-III, which is yet to be announced officially, the people cited above said on condition of anonymity.

In a letter to the heavy industries secretary, dated 9 March, Shailesh Chandra, the company's managing director, had also sought the inclusion of personal e-four-wheelers in the scheme for a span of three years, the people added.

Recommendations sent from the ministry of heavy industries to the finance ministry earlier in the year had suggested including electric four-wheelers in the Fame-III scheme.

Despite these recommendations, the forthcoming Fame-III policy is unlikely to extend subsidies to electric cars, underscoring the government's commitment to more public-oriented electric transportation solutions like buses and trucks, a government official said, requesting not to be named.

Tata Motors did not respond to Mint's queries.

The ministry of heavy industries has been holding widespread discussions under a Ficci-led EV task force to determine a roadmap for India's mobility sector for its 2047 vision statement.

Tata Motors' Xpres-T electric sedan, used by fleet operators like BluSmart and Uber, benefited significantly from financial incentives of more than ₹2.5 lakh per vehicle under Fame-II.

Fame-II, which had a total outlay of ₹11,500 crore and concluded this March, had broadly supported a range of electric vehicles including buses, two-wheelers, three-wheelers, as well as four-wheelers.

However, the distribution of subsidies had been uneven, with a large portion allocated to two-wheelers and buses, and only ₹750 crore directed towards electric cars and plug-in hybrids.

The electric mobility promotion scheme (EMPS), introduced as a bridge between Fame-II and Fame-III, which is currently being deliberated upon and will be unveiled after the conclusion of the general elections, covers only electric two and three-wheelers under its ₹500-crore corpus.

Also Read: Can electric cars electrify muted IT firms in a dull year?

The overwhelming majority of the subsidies for electric cars under Fame-II have gone to Tata Motors, which cornered the market by supplying these vehicles to fleet services.

It is the only large OEM (original equipment manufacturer) with multiple models currently certified with the Fame-II portal. This concentration of benefits has raised concerns, prompting the finance ministry to object to the continuation of such incentives, the people cited above said on condition of anonymity.

The finance ministry has argued that subsidizing four-wheelers primarily serves an economically advanced class of consumers, which may not align with the broader goals of public investment in green technology. 

However, carmakers such as Tata Motors say the penetration of electric four-wheelers in the market still stands at a nascent 2%, which is far from an inflection point in the market and, therefore, needs continued support. Carmakers have been cutting prices on electric vehicles in response to slowing demand and cooling battery prices. 

However, Tata Motors is actively lobbying for the continuation of government support, possibly through a separate scheme tailored specifically for the e-four-wheeler segment, the people cited above said. The company's pitch for continued incentives for electric four-wheelers is based on the premise that the segment can contribute to reducing India's heavy reliance on imported oil, thus saving valuable foreign exchange.

Additionally, they highlight the environmental benefits of electric vehicles in reducing urban air pollution and contributing to climate change mitigation efforts. Moreover, electric vehicles used in commercial fleets cover more kilometres than private cars, thus potentially saving more pollution per vehicle.

Since the government has so far exhausted ₹570 crore to subsidize nearly 23,000 EVs out of the total ₹750 crore corpus marked out for it, some sections of the industry believe the segment might still get incentives in Fame-III, albeit with a smaller allocation.

The debate continues as stakeholders await the official rollout of the Fame-III guidelines.

As the automotive industry adjusts to these changes, the exclusion of four-wheelers from the subsidy umbrella in the scheme could have far-reaching implications for manufacturers and fleet operators.

Companies like Tata Motors, which have heavily invested in the electric car segment for fleets, might need to recalibrate their fleet business strategies if government support shrinks.