Government sends notices to EV makers Hero Electric, Okinawa on FAME-II subsidy sops

Government sends notices to EV makers Hero Electric, Okinawa on FAME-II subsidy sops
The Ministry of heavy Industries (MHI) has sent notices to a set of Electric Vehicle (EV) makers to check if the components used in their vehicles are largely locally sourced as they avail benefits provided under the Rs 10,000 crore Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME)-II scheme, sources aware of the matter said.
According to government officials aware of the developments, Hero Electric and Okinawa have been asked to show documents that support their subsidy claims while a few other firms have also come under the scanner, sources in the know said.
Micromax co-founder Rahul Sharma's Revolt Motors and Coimbatore-based electric vehicle manufacturer, Ampere Vehicle, have also received the notices, said multiple people familair with the details.
Over the last few weeks these notices have been sent to conduct an audit at these factories, these people said.
"An audit by the Automotive Research Association of India (ARAI) is currently underway at four more EV companies besides Hero Electric and Okinawa... The scope of the audit at manufacturing facilities of EV two-wheeler manufacturers is to verify that the components used in their vehicles are largely locally sourced. This is an essential criteria to ensure that the vehicles sold by these companies are eligible to be subsidized by the centre...," said a person familiar with the development.
All of these EV two-wheeler manufacturers (including Hero Electric and Okinawa) are facing the checks but subsidies are said to have been put on hold for only the two till now, a person cited earlier said on the condition of anonymity.
“The subsidies for electric vehicle manufacturers will be restored once they submit appropriate documentation to substantiate localization claims," a senior government official said, adding that no steps to recover the already disbursed subsidy are underway at the moment.
Officials had earlier maintained that any penalties raised on these companies, for fabricating localization claims can be recovered from future subsidy disbursals. 
According to the FAME-II portal, none of the models sold by Hero Electric or Okinawa has been identified as eligible for the subsidy.
Coimbatore-based Ampere EV confirmed that audits were conducted at its factory and that the government had given it a clean chit. 
The FAME-II scheme stipulates that at least 50% of the value addition for an EV should be done locally by EV makers for them to avail of the subsidy, which significantly reduces the final price for the end customer. Losing out on the subsidy would be a blow for both EV makers, as competition heats up in the EV space with HeroMotoCorp set to launch its new electric scooters this month.
“One needs to see whether companies like Hero Electric and Okinawa are able to adjust their supply chains to start getting the subsidies again,” said Jay Kale, senior vice president, equity analyst, auto and auto ancillary, at Elara Capital. “If not, then the pricing of these vehicles could see an increase in the interim leading to advantage for players like TVS, Ola, Ather, and upcoming Hero MotoCorp.”