Government notifies EV manufacturers Hero Electric and Okinawa about FAME-II financial incentives

• ByStartupStory     |    October 7, 2022

For a group of electric vehicle (EV) manufacturers to be eligible for benefits under the Rs 10,000 crore Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME)-II scheme and receive those benefits, the Ministry of Heavy Industries (MHI) has sent notices requesting information about whether the majority of the components used in their vehicles are sourced locally.

Several other companies have reportedly come under scrutiny, according to government officials knowledgeable of the situation. Hero Electric and Okinawa have reportedly been asked to provide documentation to substantiate their subsidy claims.

Revolt Motors, owned by Micromax co-founder Rahul Sharma, and Ampere Vehicle, a Coimbatore-based maker of electric vehicles, both received notices, according to numerous sources familiar with the situation. These workers told that notices to perform an audit at these factories had been handed out during the previous few weeks.

“In addition to Hero Electric and Okinawa, the Automotive Research Association of India (ARAI) is currently conducting an audit at four other EV firms. The goal of the audit is to confirm that the majority of the parts used in the two-wheeled electric vehicle manufacturers’ cars are acquired locally. This is a requirement to guarantee that the cars offered by these businesses qualify for centre subsidies “a source with knowledge of the development stated.

All of these EV two-wheeler producers, including Hero Electric and Okinawa, are dealing with checks, but according to the individual cited earlier who spoke on the condition of anonymity, subsidies have only been suspended for the two up to this point.

A senior government official said, “The subsidies for electric vehicle makers will be reinstated after they present adequate data to substantiate localization claims. No efforts are currently being taken to retrieve the previously disbursed subsidy.”

Officials had previously argued that any fines imposed on these corporations for making false promises about localization may be offset by future subsidy payments. The government had increased oversight to stop the flow of EV subsidies to vehicles with imported content, it was reported in June of this year.

None of the models sold by Hero Electric or Okinawa has been identified as qualifying for the subsidy, according to the FAME-II webpage. Ampere EV, situated in Coimbatore, verified to ET that inspections were done at its facility and that the government had given it the go-ahead. In response to inquiries, Hero Electric and Okinawa declined to comment. As of the time of publication, Revolt Motors and DHI had not returned calls.

In order for EV manufacturers to qualify for the subsidy under the FAME-II programme, they must locally complete at least 50% of the value added for an EV, which dramatically lowers the end-user price. Losing out on the subsidy would be a setback for both EV manufacturers as the EV market is becoming more competitive as HeroMotoCorp prepares to introduce its new electric scooters this month.

According to Jay Kale, senior vice president and equities analyst at Elara Capital, “one needs to see whether companies like Hero Electric and Okinawa can change their supply chains to start obtaining the subsidies again.” If not, players like TVS, Ola, Ather, and the incoming Hero MotoCorp may benefit from a rise in the price of these vehicles in the interim.

According to an August 23 story from ET, the government is implementing a new digital process in response to complaints from various stakeholders. Under this mechanism, domestic value addition data must be calculated and kept in OEMs’ ERP (enterprise resource planning) systems. It will be necessary to upload this data to the FAME-II portal.

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