Govt Halts FAME-II subsidy for Okinawa and Hero Electric - The Timeline and in-depth analysis. - PowerPoint PPT Presentation

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Govt Halts FAME-II subsidy for Okinawa and Hero Electric - The Timeline and in-depth analysis.

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In an intresting update - Ministry of Heavy Industries halt the FAME-II subsidy for Okinawa and Hero Electric which together holds more than 30% of Market share in Electric twowheeler segment. – PowerPoint PPT presentation

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Title: Govt Halts FAME-II subsidy for Okinawa and Hero Electric - The Timeline and in-depth analysis.


1
Govt Halts FAME-II subsidy for Okinawa and Hero
Electric - The Timeline and in-depth analysis. In
an interesting update the Ministry of Heavy
Industries halt the FAME-II subsidy for Okinawa
and Hero Electric which together holds more than
30 of the Market share in the Electric
two-wheeler segment.
According to the Ministry of Heavy Industry
website the Fame II subsidy of two market
leaders of the segment has been put on hold.
Information about their adherence to
localization requirements under the government's
flagship EV promotion program to a few OEMs was
sent a notice and a subsequent site inspection
was carried out by ARAI in the past few months.
As per other sources, it has been claimed that
many other EV manufacturers were also sent these
notices. The sources include names such as Rahul
Sharma's Revolt motors Chennai-based Ampere
Vehicle. Several people in the know said that
during the past few months, representatives from
the Automotive Research Association of India
(ARAI), an organization that accredits autos in
India, have visited the manufacturing facilities
of several EV manufacturers to audit their
component sourcing. ARAI's findings significantly
influenced the decision to remove Hero Electric
and Okinawa's subsidies.
2
To be re-eligible for the incentives offered
under the FAME-II program, also known as the
Faster Adoption and Manufacturing of Electric and
Hybrid Vehicles (FAME-II) scheme, the ministry
is requesting them to present documentation to
support their claims. The government has
suspended the incentives for the two EV
manufacturers. The subsidy will be reinstated if
the two businesses present the required
documentation as evidence of satisfying the
regional value-addition requirements. Regardless
of how big the player is, the minister stated
that if they are discovered to be in breach of
the guidelines, "all necessary steps" will be
taken against them. The minister chose not to
mention the names of the two automakers. So,
What is FAME? A program called Fame India has
been introduced to promote the purchase of
Electric Vehicles. The government will offer
incentives through this program to encourage the
purchase of new electric vehicles, which will
advance electric mobility in India. This plan
will also set up the essential infrastructure
for electric vehicle charging. The Fame India
program was established to address the problems
of environmental pollution and fuel scarcity.
The government has upped the subsidy incentives
under this program from Rs. 10,000 per kWh to
Rs. 15,000 per kWh. The main emphasis of the
scheme is to promote the "Make in India" idea.
The companies that benefit from this scheme are
directed to use local products while
manufacturing the vehicles. A total of Rs 10000
crores has been relocated to support EV growth
in India under this scheme. Until now, 78045
electric vehicles in full, including 59984
electric two-wheelers, 16499 electric three-
wheelers, and 1562 electric four-wheelers, have
been sold through the Fame India program as of
June 26. What Led to This? There have been
several cases of EVs catching fire during the
previous several months. News of EV battery
fires has become a weekly occurrence, starting
with a Tata Nexon Electric SUV that caught fire
last week and continuing with Okinawa and Ola
electric scooters. Why have even the dealerships
for electric vehicles caught fire? The worried
Indian
3
government launched an investigation to get to
the root cause of this incident. This
investigation was given to the reputable
government-run Defence Research Department of
India (DRDO). The investigation panel's
conclusions are public and quite harsh. Through
alluring incentives aimed at both manufacturers
and consumers over the past couple of years, the
Indian government has significantly pushed for a
speedier adoption of electric vehicles in the
nation. Along with growing fuel prices, these
incentives have inspired a plethora of new
electric vehicle manufacturers, some of which
have little to no background in creating any form
of transportation system. But after the
uncertain incidents throughout the country, the
government has come under pressure and started to
review the incidents to halt certain regulatory
practices causing such issues. A few hundred
degrees Celsius are needed for an Electric
Vehicle (EV) with lithium-ion (Li-ion) cells to
experience a "thermal runaway episode," which
results in EV fires. Extreme heat can not cause
fires, but improper thermal management of the
battery can have a detrimental effect on
performance and shorten life. These fires are a
national concern, possibly due to something
overlooked during the design phase. The pack
assembly procedure may not be the most reliable,
weather patterns for various target geographies
may not have been taken into account, or limited
testing may not have shown weaknesses in the
defenses. One thing we have observed in the past
year is the explosive demand for EVs,
particularly 2-wheelers, and the ensuing sales of
these vehicles. The recent year's rapid scale-up
of battery and electric vehicle assembly. It
isn't a procedure that can be accelerated,
especially not at the rate it has in the past 12
months. Production magnitude can be disruptive
and cause QC nightmares if not done properly.
Variations in quality may occur due to the hasty
expansion of cell manufacturing sites and
component manufacturing/vendor development. The
recent Covid-19 lockdown has also incited
production to slow down and pile up over time.
All these reasons can be an influential factor
in such major QC concerns. Also, the rise in
demand at a national scale is responsible for
such issues. Many recent manufacturers are
switching over to global products during the
manufacturing process. Such practices are in
direct violation of the FAME scheme. Moreover,
the growth of Electric Vehicle manufacturers
across India is also a result of the simple
accessibility of Chinese electric
4
vehicle kits. These kits can be held liable for
inciting fires in the vehicles as they are cheap
and can be adopted quickly, making production
faster. Conclusion Until the subsidy resumes, it
will be essential to assess whether businesses
like Hero Electric and Okinawa can modify their
supply networks with a focus on making them
indigenous. If not, players like TVS, Ola, Ather,
and the forthcoming Hero MotoCorp may benefit
from a rise in these vehicles' prices in the
interim. The increase in the prices because of
the cut of such subsidies can also directly
affect the market. A loss to the rising EV
industry is undeniable, as per the current
situation.
Here is how the updated price will look
post-subsidy removal. Per our discussion with
several Okinawa hero dealers, it is highly
unlikely that both giants will pass on the price
burden to the end consumer. In hindsight, both
companies have increased the price of their
product in the range of 10 to 20 in the past
six months. However, one more price 10 to 20
increment is expected in ex-showroom price posts
in fresh inventory, which will be passed on to
the dealers. Additionally, to avoid further
incidents causing such chaotic outcomes, The
government is implementing a new digital process
that requires OEMs to calculate and store
domestic value addition data in their ERP
(enterprise
5
resource planning) systems. It will be necessary
to upload this data to the FAME-II portal. As
Hero MotoCorp prepares to introduce its line of
electric vehicles following its success with
petrol two-wheelers, the EV market in India is
heating up. Ola Electric recaptured the lead
position in September with 9,616 units,
according to the most recent two-wheeler EV
registration statistics. There was a 2.3
increase in two-wheeler EV registrations overall
in the month.
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