With dwindling sales E-bike makers devise strategies to stay afloat

Amidst dwindling sales and dealerships downing shutters, e-bike makers are devising strategies to stay afloat in these challenging times.

Vijay Munjal-led Hero Electric, one of the leading players in the electric bikes industry, has shifted focus to the exports market as the domestic demand has slumped post the discontinuation of the Ministry of New & Renewable Energy (MNRE) subsidy scheme in March this year.Gujarat-based Ajanta Group is asking its dealerships in the state to service bikes from other brands in order to maintain the dealer's income and, in turn, ensure its survival. Another major player Electrotherm India Ltd (EIL), makers of the popular e-scooter 'Yobykes', is trying to offer discounts to customers to make up at least partially for the discontinued subsidy scheme.

Hero Electric had acquired the assets of UK based electric two-wheeler maker Ultra Motors earlier this year. Through the acquisition, Hero Eco Pvt Ltd, a corporate entity that will look after the Munjal promoted group's two-wheeler exports, now has access to 22 countries across the globe spanning the US, the UK, Canada, as well as countries in Europe and Latin America.

"Ultra Motors had a contract manufacturing facility in Taiwan and an assembly unit in China. Besides, we now also have seven products ranging from pedelecs and mopeds to scooters in the drawing board stage, that they had developed for the European markets. We have shifted our attention to the international markets where we plan to sell the Hero A2B branded two-wheelers that will be priced between 1500 euros to 3000 euros", said Sohinder Gill, the group CEO of Hero Electric in India as well as Hero Eco.

Gill pointed out that the size of the e-bike industry in Germany is close to 400,000 bikes per annum. "Netherlands is another huge market. The collective size of market in these 22 countries would be around one million electric two-wheelers per year", he added.

Back in India, the sales have dipped to around 3,000 units per month from an earlier 7000-8000 units per month. "The industry sales have dropped by 70-80 per cent in the last few months. Not a single electric car was sold during the months of April and May", Gill said who is also the director of Society of Manufacturers of Electric Vehicles (SMEV).

Of the roughly 1000 dealerships of electric bikes in the country, 250 have already shut shop, and industry insiders say that another 250 are in the process of closing shops soon. Of the 12 e-bike players who were getting subsidy from the MNRE, three have already shut down operations, and another seven are on the verge of closing down, informed an industry source.

The uncertainties surrounding government subsidies and lack of infrastructure supporting the use of electric bikes, at least 10 small and mid-sized importers and marketers of e-bikes in Gujarat have shut shop. Only two major players, EIL and Ajanta Group now operate in Gujarat.

Ajanta Group, that sells e-bikes under the Oreva brand, has managed to retain its dealers in the state thanks to its innovative strategy. "We convinced our dealers in the state, around 70-80 in number, to offer services to bike owners of different brands as well. We tried to work with them to make spare parts available to these dealers. This ensured that the dealers made some money and, in turn, allowed them to stay open", said Jaisukh Patel, director, Ajanta Manufacturing. He, however, admitted that the company has lost more than 90 per cent of its dealerships outside Gujarat in states like Madhya Pradesh, Rajasthan and Maharashtra. "Not even five dealerships are operational outside Gujarat", said Patel. Banking on the Gujarat dealerships, the company is selling around 600-700 bikes a month now.

EIL's joint managing director Avinash Bhandari told Business Standard that the situation indeed is gloomy. "Our sales had grown by 70 per cent last fiscal, touching 80,000 units. We have been passing on the MNRE subsidy for the last 15 months, and the scheme had been a real booster to sales. Just at the time when we were planning higher penetration, the subsidy has been discontinued and there is also no clarity as to when it can be re-introduced. While the petrol price hike is contributing to footfall in our showrooms, but not even five per cent is converting into real sales", he explained.

As people are holding their decision to buy an e-scooter at the moment in anticipation of the government subsidy being re-introduced, EIL has decided to offer discounts up to Rs 1500 per bike to make up at least partially for the lost subsidy which offered a Rs 5,000 discount per bike to the customer. "It is a question of survival for us in these tough times. We hope that the spiralling petrol prices would eventually bring customers back to our showrooms, but for the moment, we have to hold ground. We are anyway operating on wafer-thin margins, and cannot offer discounts beyond what we are offering now", Bhandari said.

Makers,however, are divided on the question of re-introduction the MNRE subsidy. While Ajanta's Patel feels that subsidies cannot ensure longterm sales growth for the industry; it is necessary to prepare the customer's mindset to buy an electric vehicle because of its advantages. "If subsidies are not encouraged, the customer would learn to adjust his budget accordingly", Patel says. On the other hand, Bhandari feels that until the time the country is ready with infrastructure to support the use of electric vehicles like charging points etc, one would have to encourage customers to use a greener technology through some sort of a subsidy scheme.

Interestingly, while manufacturers have passed on the benefits of the subsidy to the consumer, almost all of them are yet to receive a re-imbursement from the government.