The FAME scheme is part of the government’s effort to boost electric mobility through greater indigenization. Pradeep Gaur/ Mint
The FAME scheme is part of the government’s effort to boost electric mobility through greater indigenization. Pradeep Gaur/ Mint

Govt tells EV makers to localize manufacturing to qualify for subsidies

  • Despite the scheme’s accent on localization, the guidelines allow imports of key battery parts to manage costs
  • All electric vehicle and hybrid manufacturers must localize manufacturing of wheel rims integrated with hub motor from 1 October 2019

Control units, chargers and AC units are among a slew of components that electric and hybrid vehicle manufacturers must build locally to qualify for subsidies under a government scheme to encourage the adoption of such vehicles.

The latest draft guidelines on Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles Scheme (FAME) list components that need to be built locally, with specific deadlines. FAME, which was introduced on 1 April 2015, entered its second phase (FAME-2) in April 2019.

The guidelines, issued by the department of heavy industry (DHI) which implements the scheme, cover manufacturers of electric and hybrid two-wheelers, three-wheelers, rickshaws, four-wheelers and electric buses, along with associated deadlines for indigenization. Mint has seen a copy of the guidelines.

All electric vehicle and hybrid manufacturers must localize manufacturing of wheel rims integrated with hub motor from 1 October 2019.

The HVAC units (heating, ventilation and air conditioning) for electric cars are also scheduled for indigenization from that date. Other key components such as electronic throttles, vehicle control unit, on board charger for all categories, and electric compressor and the DC charging inlet for electric cars and buses must be indegenized from 1 October 2020.

The FAME scheme is part of the government’s effort to boost electric mobility through greater indigenization. The second phase running from fiscal 2020 to fiscal 2022 has a budget of 10,000 crore.

Of this, 8,596 crore has been allocated to subsidize retail vehicle prices for consumers while 1,000 crore is for the charging infrastructure.

Despite the scheme’s accent on localization, the guidelines allow imports of key battery components to overcome immediate technological challenges and manage costs. Imports of lithium ion cells and battery packs, which attract a basic 5% import duty, are slated to rise to 10% and 15%, respectively, from April 2021 to drive battery suppliers to localize the technology in India.

The draft rules notify vehicle testing agencies which will ensure compliance and issue eligibility certificates to the manufacturers for registering under FAME-2.

Subsidies under FAME-2 are based on battery capacity with energy content measured in kilowatt-hour (kWh). It proposes a uniform demand incentive of 10,000 per kWh for all electric vehicles, including hybrids except buses.

The department of heavy industry has also invited electric and hybrid vehicle makers to register to comply with the FAME-2 eligibility criteria. Companies must have at least 25 vehicle dealers and service centres situated in at least two states to be eligible. Only the approved models, including all variants, qualify under the new guidelines.

“The latest DHI guidelines to promote localization of EVs in a phased manner is a positive development for the industry. The framework defines exactly what to expect from the government going forward. This is what the auto industry wanted and it is the starting point. The auto ancillaries, along with the OEMs (original equipment manufacturers), will now move together in the right direction to boost the electric vehicle manufacturing ecosystem in India," said auto analyst Aditya Jhawar from Investec Capital Services (India) Pvt. Ltd.

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