Industry is preparing for complete withdrawal of FAME subsidies: Bhavish Aggarwal

Ola Electric founder, MD and chairman Bhavish Aggarwal.

The electric vehicle industry and consumers are preparing for a complete removal of FAME subsidies as the market matures, Ola Electric's founder, MD and chairman Bhavish Aggarwal has said.

"I think the government has been intimating about this for quite some time now and we, as an industry, and consumers are prepared for the reduction of subsidies,” Aggarwal said at an event in Bengaluru on February 2.

The Centre reduced the budgetary allocation for the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) scheme by nearly 44 percent to Rs 2,671 crore for FY25, which could result in a slowdown in the adoption of EVs.

In FY24, nearly Rs 4,807 crore was set aside for FAME schemes, the government's budget allocation document published on February 1 showed.

While FAME subsidy allocation has fallen, the allocation of the Production Linked Incentive (PLI) scheme for automobiles and auto components has gone up by a whopping 623 percent, according to the budget document.

The move is likely to benefit EV's two-wheeler industry as well.

Ola Electric recently received a domestic value addition certificate under the PLI scheme.

"FAME subsidy tapering down is expected, however, the budget had announced incentives for manufacturing like PLI and Lithium cell making, which is a big boost for us, " Aggarwal said.

The electric two-wheeler industry was hit following the changes in the Fame II subsidy scheme in early 2023. June sales came down drastically to 46,000 units 1.04 lakh units in May. The numbers inched back to 70,000 in December.