FAME II Scheme's Reduced Incentives A Pain Point for Electric Two-Wheelers

The subsidies announced by the government under the FAME-II scheme was seen as a leg-up for the nascent Indian electric vehicle industry – in fact, the government’s proposed move to invest Rs 10,000 crore over a three-year period aimed at supporting ten lakh two-wheelers, five lakh three-wheelers, fifty five thousand four-wheelers and seven thousand e-buses, is being seen as just what the doctor ordered for the electric vehicles in the country,

But just a month after the government’s big-bang announcement, the FAME II scheme has left a pall of disappointment among the electric two-wheeler segment simply because the scheme has outlined a stringent eligibility criteria that will make it exceedingly tough for EV players to avail the scheme.

The FAME II scheme specifies that e-scooters in order to avail the scheme need to have a range of 80 km – a specification that could turn out to be a dampener for electric two-wheelers – electric two-wheelers currently have a range of around 60 km. It is generally felt that around 95 % of electric two-wheelers may not benefit from the scheme.

Range is not the only ‘concern’ point. The FAME II scheme also stipulates that companies that wish to avail the scheme must produce vehicles that have at least 50 % localisation. This could be a huge roadblock for adoption of EVs in India because given the current low volume of EVs the Indian component suppliers are not ready yet to manufacture EV components.

If the stringent eligibility criteria for 80 km range and 50 % localisation are not, the country's EV players are also unhappy with the government reducing the incentives from Rs 22,000 per kWh (as announced in FAME Scheme I in 2015) to Rs 10,000 per kWh in the FAME Scheme II for all vehicles save for buses. 

The apex body for EVs in India – the Society of Manufacturers of Electric Vehicles (SMEVs) has said such a move has seen prices of city-speed electric two-wheelers increasing by around Rs 10,000-12,000. Further, the SMEV has already sounded out the NITI Aayog and Department of Heavy Industry (DHI) over its strong reservations about the reduced incentives under the FAME Scheme II. It remains to be seen whether the government acts promptly and ensures the scheme really benefits the electric vehicle industry and not defeat the very purpose of doling out subsidies for rapid adoption of EVs in the country.

Important To Build On FAME II Subsidies By Indigenising EV Components

Cleaner mobility is an absolute need, and there’s widespread acceptance that of all alternate fuel technologies available in the market, electric mobility is the most pragmatic solution. However, it won’t be a far-fetched exaggeration to suggest that policy makers in the country have been quite indecisive with its EV policy – in fact, a slew of policy flip-flops has been nothing but a dampener on India’s EV push.

All these uncertainty appears to be a thing of the past with the government allocating Rs 10,000 cr under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) II scheme, which will be implemented over a period of three years with effect from April 1, 2019. It may be worth noting that the latest move is an expanded version of the FAME scheme that was launched on April 1, 2015 with a total outlay of Rs 895 cr. The FAME II scheme plans to support 10 lakh electric two-wheelers, five lakh three-wheelers (meant for public transportation), 55,000 four-wheelers (meant for public transportation) and 7,000 buses.

INDUSTRY BUZZ

Understandably, there is a buzz of excitement and hope across the automotive industry over FAME II. There is no denying the fact that the scheme will not only fast-track the electric vehicle ecosystem, but also provide a certain degree of clarity and direction for EVs to thrive across the country.

Mahindra Electric, one of the pioneers of electromobility in India, said the FAME II scheme is just what the doctor ordered for the Indian EV ecosystem. “The scheme assures a long-term stable policy and outlines a clear vision for OEMs, component suppliers, fleet operators and dealers to have a clear direction for the next three years and help India to be one of the global EV leaders,” said Mahesh Babu, CEO, Mahindra Electric. He added that the scheme aligns well with the National Electric Mobility Mission Plan 2020 (NEMMP) and addresses key issues such as national energy security, mitigation of adverse impact of vehicles on the environment and growth of domestic technology and manufacturing capabilities.

The FAME II scheme accords high priority to electrifying the public transportation space and talks little about electrifying the personal mobility space. Babu felt that the move will work well for the Indian market, as fleet becomes the first priority given the impact on oil import, pollution and asset utilisation. The focus on public transportation is the need of the hour, he said and added that electric three-wheelers, shared fleet of electric cars and electric buses will in a way create an ecosystem for personal buyers to consider EVs.

The FAME II scheme talks about offering incentives only to those vehicles that are powered by lithium-ion batteries, which effectively means that lead acid batteries will go off the EV radar in due course. Babu said globally lead has been phased-out given its negative impact on the environment and Mahindra Electric is aligned with the government’s view of leveraging advanced battery technologies as defined by FAME.

ADVANCED BATTERY TECHNOLOGIES

Akshaye Barbuddhe, Business Head, EV Charging Solutions, Delta Electronics India said lithium-ion batteries are also more efficient as it provides a constant voltage through the whole discharge cycle, whereas lead acid batteries experience a constant drop of voltage. Maintaining constant voltage also translates into better efficiency. Of course, lead acid batteries are the cheapest to produce but as Barbuddhe pointed out, the real cost of owning a lithium-ion battery is far lower when factoring in performance and battery longevity. They are safer to use and offer a superior option in terms of environmental impact too.

One cannot overlook the fact that charging infrastructure is perhaps the biggest roadblock for EVs to thrive in India. And the FAME II scheme appears to address this as it has proposed establishment of 2,700 charging stations across metro as well as across other smart cities, Tier 2 cities and hilly regions and at least one charging station in a grid of 3x3 km.

Barbuddhe underpinned the role of DISCOMs in the EV push. “The government should push power DISCOMs to provide much-needed assistance, in terms of facilitating knowledge sharing and installation procedure to its consumer base,” he said. He urged the government to map out a long-term strategy to develop software solutions that will cater to the future needs of connecting all public charging stations with a common platform. Doing that would provide easy access to charging stations for end-users as well as ensuring 24/7 monitoring of charging stations by respective agencies as well as Central Electricity Authority (CEA). Effective grid management is critical towards ensuring EV charging infrastructure. Without adequate grid management, the system created to cater to EV infrastructure would eventually collapse, he said.

LOCALISATION OF EV COMPONENTS

Although appreciative of the FAME II scheme announcement, the industry has been equally critical of the scheme’s position on localisation of EV components to avail of incentives upfront. Ashim Sharma, Partner, & Group Head, Nomura Research Institute (NRI) Consulting & Solutions India, said India must attach importance to cell level manufacturing for EVs.

“If we import battery cells from abroad and assemble it together in India and make a battery pack, then there is limited value-add happening in India. A cell importing approach will reduce the manufacturing base in India in EVs when compared to ICEs,” he pointed out. Delving deep into battery management system (BMS), Sharma said the hardware of the BMS will continue to be imported as India does not have a vibrant semi-conductor, sensor manufacturing base, while the software testing for the BMS is readily available.

Electric motors are another area India can explore indigenising for EVs be it induction motors and permanent magnet motors. “Performance wise, there has been a slight shift towards permanent magnet motors but these are made of rare earth materials and large extraction of such materials happens in China. India needs to bring about technological innovations to reduce the amount of such rare earth materials used or look at other alternatives. Induction motors have overheating deficiencies and again innovation is needed to reduce this overheating.”

Kaushik Madhavan, Vice President – Mobility, South Asia, Frost & Sullivan felt that electric motors can be the first step towards indigenising components and sub-systems in the EV mobility ecosystem. “The electric motor technology in India is far more advanced as some Indian players are developing this technology. We could then look at battery manufacturing, including cells, and battery packaging.”

Madhavan called for intense discussion on how the industry can approach recycling of used batteries. There is a need to study and understand what we can do with used batteries, recycle them and make them viable for second life applications, he said. “As for now, there is no clear mandate or roadmap for battery recycling and this area can be the next stage of discussion so that a framework is in place for second life applications,” he suggested.

Given India’s limited EV manufacturing base and the evolving battery technology, it is imperative to incentivise the manufacturing ecosystem in order to optimise manufacturing costs that would ultimately cascade towards reduced EV prices, said P Pranavant, Partner, Deloitte India.

The FAME II scheme is clearly just what the doctor ordered for the Indian EV space. But it is equally critical that adequate steps are undertaken for indigenising EV components in areas of BMS, motors, controllers, etc. The EV push can only be a viable customer proposition in India when end-users feel that there is a ‘fundamental need’ to buy it.

‘Fundamental Need Has To Be Created for Adoption of Autonomous Vehicles’

Autonomous vehicles or self-driving cars have been generating plenty of buzz across the automotive industry globally. Autonomous cars are increasingly seen as something that will transform the way people ‘drive’. However, in the Indian context, the jury is still not out on whether such self-driving cars would be adopted in a big way, as there are strong reservations in various quarters over whether autonomous vehicles would end up eliminating jobs of cab drivers in a large way and whether the country will be ready with required infrastructure in years to come.

Mumbai-based Unlimit IoT has been working on ensuring next generation vehicles such as autonomous vehicles run in the manner it is supposed to run. Pradeep Sreedharan VP – Sales & Operations, Unlimit IoT, said the global automotive industry is a rapidly evolving space and is exploring different possibilities of how mobility can not only be less time-consuming, but also score high on safety and comfort parametres. In fact, autonomous vehicles are talked about as the most anticipated thing to happen across the industry alongside hyper loops, supersonic flying trains, flying cars and land airbus, he noted.

The Unlimit IoT top official said autonomous cars will not only transform the way end-users operate, but will also change the way end-users think since it is all about sensing the environment with very less human input. Of course, mobility has undergone a significant shift over many decades. 150 years back ago people were driven by animals, subsequently by animals and then by humanoids, in terms of robots or any artificial intelligence.

Sreedharan said the industry is even looking at a scenario where no one may want to drive the vehicle in coming years given the stress involved around it be it traffic snarls, rowdy driving, etc. Level 4 autonomous cars are absolutely available, but also added that Level 5 autonomous cars will be slightly difficult to grow as no one can say for sure how fast is the industry moving toward Level 5, he pointed out.

It is pertinent to mention that the automotive industry will witness a huge data explosion even as driverless cars are being adopted across the globe. Sreedharan said data will emerge as the new ‘oil’.

Sreedharan said every autonomous car roughly takes around data conception in the present standards equivalent to 3,000 people. Every such car will churn out 4,000 GB of data every day and one can well image the data generation in such cars, he added. There is huge data generation for autonomous cars because such vehicles are equipped with hundreds of on-vehicle sensors. It is said that cameras alone will generate 20 to 40 Mbps, while the radar will generate between 10 and 100 Kbps. There is no denying the fact that going forward automotive firms will become big computer organisations, Sreedharan stated.

Sreedharan also underpinned safety as the biggest USP of autonomous cars. He cited a US survey which revealed that people using autonomous cars in the US believe that the amount of insurance they pay out significantly reduces for autonomous cars and they quantified that in 191 million dollars. The survey stated that 91% of accidents is related to human error, which only underlines the essence of safety in such cars.

More importantly, Sreedharan said autonomous cars will ensure a peace of mind for vehicle user besides offering fuel efficiency and increased productivity. For an Indian scenario, any office-goer will reach office with less stress because he does not have to drive manually and also because traffic management in India is much better because vehicles move in directions and not in lanes, he noted.

He said driverless cars are a concern area for a country like India, where driving as a profession provides livelihood to thousands of people, especially cab drivers. Even insurance companies will have to change their business model completely, he opined.

Sreedharan touched upon how driverless cars could potentially reduce carbon footprint. If people start living outside cities, it means they will travel from outside the city, which will result in an increase in fuel consumption but will reduce carbon footprint in the city, he explained.

Sreedharan said autonomous cars have interesting advantages and challenges and it will require a huge amount of work before such are cars are widely deployed across the globe. “Automotive companies have to figure out how they can jump the castle – how you are going to manage it or adopt it. Price is a big thing in India and there must be a fundamental need created for people to use autonomous cars as adoption will not happen just because of a general want,” he concluded.