Electric car subsidy program in flames

The main concern of electric cars has been battery catching fire. Now, the entire Central Government subsidy program is in flames. The faster adoption and manufacturing of EVs (FEM II) initiative in 2019 was supposed to be a pioneering policy initiative aimed at transforming the Indian mobility sector by incentivizing the adoption of E-vehicles over fuel guzzling, old-tech internal combustion engine ICEvariantes. Today, as its current phase comes to a close in 2023, it stands defamed, even defanged of its potency. A combination of schadenfreude and corporate shadowboxing has made the babus in the ministry of heavy industries rake up issues - - centers around the degree of localization of electric scooters and initiate a series of punitive steps that has all but left the sector doddering. Their decision to withhold subsidies, threats of penalties on close to a dozen erring companies have also exposed the failure lines of overestimating India's true manufacturing prowess while simultaneously giving out a warning signal to all private players who have been relying on various ongoing subsidy schemes that one may receive funds only to be asked to give it back by those very risk averse bureaucrats who had handed over the cheques to them in the first place. The Prime Minister's vision for decarbonization was driven by this ambitious drive that paralleled the need for energy independence, resulting in the launch of this ambitious drive. The co-adjuvant phased manufacturing plan PMP was a collateral attempt at economic self-reliance, aiming to reach a localization target of 50% in stages with incremental item by item deadlines. Call it a Make In India hard sell that rode piggyback on the growing chasm between Beijing and Washington that has resulted in most corporations adapting to a China 1 strategy. However, he threw everyone off gear. Failing to localise as per the original schedule when the entire world was in a disarray, multiple representations were made by several E-scooter players to the relevant ministry seeking PMP extensions. At that point, volumes were too low for auto component suppliers - themselves paralyzed under business uncertainties - to entertain fresh E-scooter orders by making fresh capital investments. The initial response from the government was supportive and extensions were offered based on which vehicles were even certified by relevant bodies and subsidies were reimbursed until 2022 when they were abruptly stopped due to anonymous complaints. Almost a year passed before the companies were informed their subsidies were being withheld, by which time they had cumulatively passed on almost Rs 1200 crore worth of subsidies to customers. In 2023, recovery notices were sent to them seeking the amounts back retrospectively. In the first place, it is strange that one arm of the same government had instituted an emergency funding scheme ECLGS to save jobs and local industries dealing with the unprecedented crisis while another sought a crackdown on some of the earliest movers who had fuelled the EV revolution. If the original spirit of FAME was to move the largest number of dirty-fuel scooter users to EVs by aiming at the lowest end of the customer profile, the policy got progressively diluted to include higher-rated batteries for more power, which also increased the price of the vehicle. Even though the policy had a price limit of Rs 1.5 lakh ex factory, the higher powered premium vehicles ended up cornering the largest part of the budget. The average subsidy per vehicle too changed drastically, doubling from the original intended Rs 20k vehicle to about 40k per vehicle, drying up the budget before time. The ministry also lost its target by half - making it the only government in the region to do so. It seems the budgetary allowance was fixed first, and maths followed there after. If the proposed subsidy claw back of Rs. 500 Crores is added to the Rs. 1400 Crores withheld till date, it would tantamount to almost zero allocation to the industry in the last 4 years of the scheme, while the private sector passes on the subsidy to customers from their own pocket. The governments would have had achieved the impossible feat of rolling back a government scheme in toto. Some knee jerk reactions also perpetuate an industry misnomer that all vehicle manufacturers, including a, are original equipment manufacturers OEMs. After designing or developing the prototype at home, many actually outsource significant parts of the critical components to a network of multi-tiered independent vendors who achieve economies of scale by aggregating demand. EVs are especially complex engineered parts that are best left to experienced suppliers, even though makers like Ola, Tatas and others are working on vertical integration, the dependence on vendor model remains high and prevalent. Why does the manufacturer have to go bankrupt if the suppliers don't deliver? While some top tier manufacturers have effectively pushed the envelope using sales strategies structures to obfuscate, the petty knit pick and over regulation is working against the core idea of E-Mobility itself, encouraging both the private sector and the government to try and game the system by outsmarting each other and in the process blowing a once-in-a-lifetime manufacturing opportunity. Make targets that deliverable, remove the funding choke that has already seen incumbents and early movers fall by the wayside and also a 20% industry wide sales drop since January 2022. Subsidies cannot be evergreen, but for now target the sops to those who deserve them and make them equal for all by levelling out the distortions. For a quarter of the target production, the premium EV two wheelers shouldn't eat up half of the budget. Instead, he allowed the budget to last longer, causing a larger pool to exist. Else only the corporate lawyers will end up with bigger cars and better homes.