This is a major initiative to streamline incentives under Faster Adoption and Manufacturing electric car (FAME-II) scheme, the Ministry of Heavy Industry announced that the calculation method for electric four-wheelers and electric three-wheelers will be changed from showroom price to ex-factory price.

The decision, conveyed in a gazette notification issued on Friday, comes into effect immediately for all new sales, as confirmed by Mint’s Additional Heavy Industries Minister Dr. Hanif Qureshi. The revision aims to eliminate pricing differences between states and standardize the treatment of all vehicle segments within the policy framework.

Previously, incentives were calculated based on ex-showroom prices, with differences arising due to different pricing structures across states. Now, with the transition to ex-factory prices, calculations will exclude factors such as GST, freight and dealer margins, providing a more consistent basis for incentives.

Dr. Qureshi stressed that this adjustment is in line with the decision to calculate incentives based on the ex-showroom price of two-wheelers in 2023. He told Mint that similar rules should apply to all vehicle categories incentivized by the FAME-II scheme, and the move to ex-factory prices facilitated such harmonization.

However, the change may lead to a reduction in subsidies for original equipment manufacturers (OEMs) such as Tata Motors and Mahindra. The level of incentives required will now depend on ex-factory prices, which could reduce per-vehicle subsidies.

In response to concerns that a sudden shift in pricing norms may lead to sales disruption, the Ministry of Heavy Industries has sanctioned additional Rs 1,500 crore for expenditure under the FAME-II scheme. The grant comes ahead of the program ending on March 31 and is intended to alleviate any immediate challenges arising from the transition.

Despite the additional funding, some industry experts have expressed concerns about the real impact of Mint’s changes. An executive who asked not to be named said, “The notice does not clarify whether the new ex-factory price standards apply to vehicles registered or sold starting from February 9. Since many dealers assume a certain level when charging vehicle fees, The amount of the subsidy, if the amount we can apply for changes, we will have to recalculate.”

Under the revised plan, incentives for two-wheelers and three-wheelers will still be linked to battery capacity, capped at 20% of the vehicle cost. The cost here refers to the factory price and does not include additional retail costs.