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Hyundai needs ‘more clarity’ on India’s electric vehicles policy, per report; our take

Hyundai believes that “more clarity is needed” on India’s electric vehicles policy framework for its “right implementation”, reports the Economic Times. SS Kim, MD, Hyundai Motor India said that while India’s push towards electric mobility is a “step in the right direction”, his company is still unsure if the government’s plans for EVs were “officially announced”. The government tweaked its FAME (Faster Adoption of Manufacturing of (Hybrid &) Electric Vehicles) scheme – which currently is the only official policy document that talks exhaustively of EV subsidies and incentives – in March this year. The scheme was initially announced in 2015, and its second phase ‘FAME II’ has been in effect since April this year after being announced in March. Mint reported last year that the government had dropped the idea on an standalone policy on EVs.

FAME II – the only EV related govt scheme

The salient features of Phase-II of the FAME India Scheme, called the FAME II, was announced in first week of March 2019, which proposes to give a push to electric vehicles (EVs) in public transport and seeks to encourage adoption of EVs by way of market creation and demand aggregation. The total outlay of for FAME I, was around Rs. 795-895 Crore and the total fund requirement for FAME II is Rs 10,000 Crore over three years from 2019-20 to 2021-22, supporting 10 Lakh electric two-wheelers, 5 Lakh three-wheelers, 55,000 commercial/fleet electric cars and 7000 electric buses.

In FAME-II, the government made a significant departure as it did not provide incentives to private car buyers, unlike FAME-I, where buyers benefited from a direct subsidy of Rs 1.38 lakh. While FAME-II provides an even higher subsidy of Rs 1.5 lakh, it is limited only to those buyers who want to put their electric car to commercial use. Its possible that Hyundai is worried about the future of electric cars for private use since they are about to launch an EV in the Indian market later this year.

If further tweaks aren’t made to FAME II, it would be a clear signal that the government prioritises sale of electric vehicles in the commercial segment, since it is a largely volume driven market. If that were to happen, Hyundai already seems to have a plan in place. The solution to that lies in the Rs. 2,000 crore investment that Hyundai and Kia made into Ola last year. Hyundai’s major plan to benefit from the FAME II scheme lies in the key provisions that the scheme has for shared mobility.

Is Hyundai waiting in the wings to tap into the highly incentivised shared mobility?

The biggest push for electrification of Indian transport in FAME II seems to be clearly aimed at the direction of shared mobility – an idea that questions the owner operator model of transport. FAME II exempts hybrid vehicles and full electric vehicles from off road and registration taxes, but more importantly, provides that benefit specifically to commercial vehicles, public transport, and two-wheelers. In fact, according to Reuters the government has directed taxi aggregators including Ola and Uber to electrify 40% of their fleet by 2026, and start by converting 2.5% of their fleet to electric by the end of 2021. In the backdrop of this report, Hyundai’s investment in Ola makes much more sense. Apart from that, road and registration taxes add up a significant chunk of money to a vehicle’s “on-road” price, and by relaxing those taxes for commercial/fleet EVs, its possible that the government is perhaps looking to push electrification through public transport.

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