Electric two-wheeler makers prepare to hike prices as new subsidy norms come into effect from tomorrow

With the new subsidy norms on FAME II set to kick in from Thursday, it's a busy time for the marketing departments of EV makers, as they look to rework the retail prices. The revised prices will vary from manufacturer to manufacturer depending on the subsidy they enjoyed before and what they will pass on to the consumers in addition to state subsidies in some cases. The government has cut the subsidy provided under the FAME II (Faster Adoption of Manufacturing of Electric Vehicles), applicable to electric two-wheelers registered on or after 1 June 2023.

Market watchers estimate that the price hikes of the electric 2Ws can range from 10-16 percent as many of the players would want to ensure the revised prices have minimum impact on the consumer sentiments. However, some manufacturers have already indicated the new prices.

Ola Electric said it will hike the prices of its models S1 pro and S1, by Rs 15,000 each, the company informed Autocar Professional, adding that the revised prices will reflect on the company website by midnight. The Ola S1 pro, which currently sells for Rs 1,25,000, will be increased to Rs 1,40,000, whereas the Ola S1 will go up from Rs 1.15 lakh to Rs 1.30 lakh. 

Ather Energy will be the most severely impacted when it comes to revising its price hike. Models like the Ather 450X with Pro Pack, which sold for Rs 1,46,743, will likely jump to Rs 1,71,907 (a hike of Rs 25,1864), leading to a 15 percent bump in its prices. The company management accepted that prices would be revised but denied the quantum of the hike. "I don't think we will be taking such a huge price hike, but it will be closer to our competitors than before," a company spokesperson informed Autocar Professional. Some states had offered subsidies to encourage EV adoption in 2021. 

The TVS iQube S, which was selling for Rs 1,29,686, is likely to be topped up by Rs 23,897, which is a 16 percent increase in its prices due to this revision. Some TVS retailers hinted that the price of TVS IQube could be hiked by Rs 20,000–Rs 25,000.

Hero MotoCorp’s  Vida V1 Pro, which costs Rs 1,39,900 and will now have to be revised to Rs 1,69,915, a hike of Rs 30,015 could be effected, causing an 18% incremental increase in prices when the company formally decides to revise the prices. "We haven't decided to revise the price of Vida VI Pro, and, likely, we may not even go for a price hike, or the quantum of the hike will be marginal," informed a company official. The price of Vida models in Karnataka is already high as the state doesn’t offer subsidies to buyers, unlike Rajasthan or Delhi.

Ahmedabad based Matter Aera e-bike which earlier cost Rs 1,43,999, will now be dearer by Rs 30,000.

With the reduction in FAME II incentives and the subsequent price hikes by EV manufacturers, it remains to be seen how both the industry and electric vehicle customers will respond to these changes and adapt to the impact they may have.

Ketan Mehta, Co-founder and CEO of Japiur-based Hop Electric, claims that "we are ready" for the EV industry to stand on its own. He stated that "Subsidies are no longer necessary for the growth of the electric two-wheeler business, so lowering and eventually abolishing the FAME subsidy is a step in the right direction." Mehta did not say if the price of his Hop electric motorcycles, which start at Rs 1,25,000, will increase, but Sohinder Gill, CEO of Hero Electric, said the business intended to maintain existing rates. "Fortunately, we will maintain our rates; I'm not sure about others."

Leading OEMs used up 80% of the subsidy in the last six months. "In the market, incumbents are almost non-existent due to their dominance, with stuck subsidies totalling more than Rs 1,200 crore. These OEMs may now hastily create simplified versions of their products to preserve market dominance.  The Indian market is still price-sensitive, and consumers' understanding of the total cost of ownership is still developing,” Hero Electric's Sohinder Gill said.  Hero Electric is one of the first EV OEMs to have gone on record to state that they will not be increasing their two-wheeler EV prices.

The Society of Manufacturers of Electric Vehicles (SMEV) had earlier sent a petition to a Parliamentary Standing Committee on unpaid subsidies worth Rs 1,200 crore, leading to a ‘serious liquidity crisis’ among EV makers.

Hemal Thakker, Senior Director at Crisil Research, told Autocar Professional that he expected that both the premium and mainstream sectors would be impacted, but the long-term total cost of ownership continues to be good. By managing benefits, cutting exposure, and giving subsidies more fuel to last longer, the government is structurally heading in the correct direction, he added.

Samarth Kholkar, Co-founder and CEO of Bengaluru-based Blive said that as the prices are set to increase, they would support OEMs and customers who will need leasing options for electric vehicles, with their tier two, tier three, and tier four market outreach platforms.