FAME-3 To Be Rolled Out In Two Months

Utkarsh Agarwal Sep 04, 2024

As the Indian government gears up to launch FAME-3, the electric vehicle industry is facing significant challenges that could dampen the ambitious goals set by policymakers

In a significant move towards accelerating the adoption of electric vehicles (EVs) and reinforcing India’s position as a global leader in the EV sector, the Government of India is set to roll out the third phase of the Faster Adoption & Manufacturing of Electric Vehicles (FAME) scheme within the next two months. This announcement was made by H. D. Kumaraswamy, Union Minister for Heavy Industries, during the National Conference on Electric Mobility, organised by ASSOCHAM.

Addressing the conference, Minister Kumaraswamy emphasized the government’s unwavering commitment to fostering a robust and sustainable EV ecosystem. “The Government is unwaveringly committed to advancing India’s EV ecosystem with a focus on fostering local manufacturing and sustainable growth. The third iteration of the Faster Adoption & Manufacturing of Electric Vehicles (FAME) scheme will be rolled out within two months,” he declared. This new phase of FAME-3 is expected to play a pivotal role in boosting the EV sector across various segments, including heavy-duty trucks, enhancing the EV value chain, and improving the necessary infrastructure.

Minister Kumaraswamy highlighted the impressive growth in the domestic EV market, particularly in the two and three-wheeler segments. In July 2024, domestic sales of three-wheelers surged to 59,073 units, reflecting a 5.1 per cent year-on-year (YoY) growth. Meanwhile, two-wheeler sales reached 14,41,694 units, marking a significant 12.5 per cent YoY growth.

Understanding the FAME Subsidy

The FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme was launched to promote the manufacturing and adoption of electric and hybrid vehicles across the country. It is part of the National Electric Mobility Mission Plan (NEMMP) and aims to reduce dependency on fossil fuels and curb vehicular emissions. The FAME subsidy primarily provides financial incentives to manufacturers and buyers of electric vehicles, helping to offset the higher costs associated with EVs compared to traditional internal combustion engine vehicles. It also supports the development of charging infrastructure, research and development, and the creation of a skilled workforce for the EV sector.

The second phase of the FAME scheme, known as FAME-2, was launched in April 2019 with an outlay of Rs. 10,000 crore (approximately $1.2 billion) and was initially set to run for three years. However, due to the growing demand and the need for further policy support, FAME-2 was extended beyond its original end date, concluding in March 2024. During the period, FAME-2 significantly boosted the EV market in India, especially in the two-wheeler and public transportation segments. The scheme facilitated the deployment of approximately 7,000 electric buses, over 5 lakh electric three-wheelers, and around 10 lakh electric two-wheelers.

In a special address, Tarun Kapoor, Advisor to the Prime Minister Modi, highlighted the global opportunities in the EV sector. “The Electric vehicle sector is one where India has an opportunity to be a global leader. The transport sector, as a whole, contributed 13 per cent of total CO2 emissions, of which road transport’s share is 90 per cent. We must take a holistic look at the transport sector to tackle our environmental issues,” Kapoor stated. He underscored the massive potential in India’s EV market, citing that in 2023, global EV sales reached 13.8 million units, accounting for 18 per cent of total vehicle sales. In India, the sale of 9 lakh two-wheelers, 5.8 lakh three-wheelers, and 85,000 four-wheelers demonstrates the burgeoning demand and the opportunities that lie ahead.

Nishant Arya, Chairman of the National Council on Green Mobility, ASSOCHAM, and Vice Chairman & MD of JBM Group, provided an industry perspective, emphasizing the sector's evolution into an ecosystem. “The EV sector in India has transitioned into an ecosystem play now with multiple traditional OEMs, startups, and EV aggregate manufacturers in the battery pack space and projects under the PLI scheme. The sector has the capacity to generate 50 million jobs in the next 10 years,” Arya said.

Arya further called for continued policy support, advocating for sector-focused policies like the Production Linked Incentive (PLI) scheme and the classification of the EV sector as infrastructure, which would significantly boost growth. He also highlighted the critical need for skill development, pointing out that the budget allocations toward employment and skilling are timely and necessary to equip the workforce with advanced skills in electronics, diagnostics, metallurgy, and new-age technologies.

The Road Ahead

As the Indian government gears up to launch FAME-3, the electric vehicle industry faces significant challenges that could dampen the ambitious goals set by policymakers. Despite the promising growth in certain segments, the industry is grappling with a noticeable slowdown, particularly due to supply chain disruptions, high costs of essential materials like lithium, and limited charging infrastructure. These issues have slowed the momentum built by FAME-2, raising concerns about whether FAME-3 can deliver the expected outcomes.

Critics argue that while the government’s push for rapid EV adoption is commendable, it overlooks the underlying issues that continue to plague the industry. The lack of a robust domestic supply chain for critical components, such as batteries, and the dependency on imports make the industry vulnerable to global price fluctuations and supply shortages. Moreover, the high upfront costs of EVs, coupled with insufficient financial incentives, continue to deter a large segment of potential buyers, particularly in rural and semi-urban areas.

The slow pace of infrastructure development is another critical concern. While urban centers are gradually seeing an increase in charging stations, rural areas remain largely underserved. This disparity could hinder the widespread adoption of EVs, limiting the impact of FAME-3 to specific regions rather than driving a nationwide transition to electric mobility.

As FAME-3 approaches, there is a pressing need for the government to address these critical issues comprehensively. Without tackling the root causes of the slowdown, the ambitious targets of making India a global leader in electric mobility could remain out of reach. The upcoming phase must not only incentivise adoption but also focus on building a resilient, self-sufficient ecosystem that can sustain long-term growth in the EV sector.