Glory: Electric vehicle companies meet with officials to explain FAME-II mispricing allegations

Representatives of the manufacturer of electric vehicles Ola Electric, Ater energy, TVS Motors And Hero MotoCorp have met with government officials to defend themselves following recent whistleblower claims that they are underpricing their products to take advantage of the subsidy, people with knowledge of the matter say.

These EV manufacturers responded to an email sent by testing agency Automotive Research Association of India (ARAI) asking for clarification on whether they bill their chargers and additional software upgrades separately to take advantage of the government’s Accelerated Adoption Program. and production of electric and hybrid vehicles”. (GLORY) scheme II.

On Feb. 9, ET reported that these companies came under government scrutiny after a whistleblower accused them of separate billing for software and charger to artificially keep vehicle prices below a set mark. to take advantage of subsidies.

The development also comes as the government is reconsidering the prospect of not renewing the FAME-II subsidy even if the industry calls for an extension. On March 7, ET reported that the Rs 10,000 crore scheme is unlikely to be extended beyond the end of the next financial year.

“We are unlikely to renew the scheme beyond FY24,” a senior government official said, adding that FAME II’s key goals will have been achieved by then.

The industry expects electric two-wheeler subsidies to run out even sooner.

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The first of the misjudgment meetings was held on February 13 under the chairmanship of Heavy Industry Co-Secretary Hanif Qureshi. The meeting was also attended by ARAI officials. The ministry has not responded to inquiries sent by ET as of press time on Sunday.

While no suspensions or penalties have yet been applied, these companies have been asked to provide further clarification and evidence on the matter.

“Why are chargers and productivity software billed separately if they are optional items,” one of the officials asked at one of the meetings. The software in question here is productivity software which once installed on an electric scooter makes it a better option.

The companies produce the same hardware for different variants, and the prices depend on the software installed inside the vehicle. For example, Ather has a base variant called 450 plus and a higher variant called 450x. The company sends 450 plus by default to all dealers. Depending on customer demand, the dealer purchases additional software packages to upgrade to 450x.

The additional software is billed as a “virtual accessory” to enhance the user experience, and EV manufacturers claim it is not a necessary or integral part of the vehicle.

In terms of chargers, the companies claim that not only is the charger not an integral part of the vehicle, but it is an option for customers as they already have another charger in case they have another electric vehicle, and also because for public charging. the infrastructure they have created.

Both Ater and Hero MotoCorp said they installed free charging stations for customers. Ather claimed to have 1,100 Ather Grids and a team of 100 working for free for customers. Hero MotoCorp, which sells electric vehicles under life brand, installed 300 charging stations in 50 cities.

Ather Energy, Hero MotoCorp and TVS Motors have declined to comment for this story, while Ola Electric has not responded to inquiries sent by ET as of press time.

The questioning comes amid scrutiny of companies that benefit from FAME-II subsidies. The government is investigating companies such as Hero ElectricOkinawa and Ampere, among others, following whistleblower complaints that the companies did not meet the required localization and domestic value-added regulations to receive the subsidy.

The government has withdrawn subsidies to Hero Electric and Okinawa after reviewing their localization regulations, and ARAI is testing several companies to make sure they comply with its regulations. The government has suspended subsidies for several electric vehicle manufacturers pending an audit.

ET reported on March 5 that The suspension of the subsidy forced several manufacturers of electric two-wheelers to slow down production. and some marginal players to close the shop.

The senior government official and company executives mentioned above believe the four companies accused of mispricing can be legally safe as the charger and billing software separate from the car do not violate FAME rules on paper.

The car’s factory price must be below Rs 1.5 lakh to qualify for the FAME-II subsidy. Adding a charger and software to the cost will raise the overall price of many models above that. The scheme currently provides subsidies of Rs 15,000 per kWh battery size for two-wheelers with a discount of up to 40% (maximum factory price of 1.5 lakh).

There are indications that the cap price could be raised to Rs 1.8 million, said the government official mentioned above.

The charger has a separate GST rate, which is higher than the 5% charged on a vehicle, and is therefore an accessory, one executive argued. Separate GST rates apply to software as well.

Another industry executive with knowledge of EV-related policies said FAME’s policy says nothing about its software side, so it’s hard to challenge the company from a legal standpoint.

“The confusion around the software comes from the fact that the FAME laws don’t say anything about it, so it would be difficult for the government to claim that companies have broken any rules,” an EV executive said on condition of anonymity.

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