Business Standard

Subsidies should be cut gradually: Hero Electric MD Naveen Munjal

In June, electric two-wheeler sales decreased in India by 56.3 per cent month-on-month (m-o-m) to 45,806 units, primarily due to the aforementioned price hikes

Naveen Munjal

Naveen Munjal, Managing Director at Hero Electric Vehicles

Deepak Patel New Delhi
Subsidies that are currently being provided to boost electric two-wheeler sales should be gradually cut because if they are suddenly stopped, it will break the momentum that this segment has gained in the last couple of years, Naveen Munjal, Managing Director, Hero Electric, said on Tuesday.

"We are not great believers that the subsidy is the way to go in the long run. Our business model is subsidy agnostic. We are building vehicles in a way that they have to be able to sustain themselves," he said during a panel discussion at Business Standard EV Dialogues.

The Ministry of Heavy Industries (MHI) had in May cut subsidies under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) India scheme. This curtailed structure came into effect from June 1 onwards, following which electric two-wheeler makers such as TVS Motor Company, Ather Energy and Ola Electric have increased prices of their products. Hero Electric did not increase its prices. 

Malavika Pillai, Principal Investment Officer, International Finance Corporation, stated during the panel discussion that the subsidies should now be shifted from the personal electric vehicle (EV) segment to establishing an all-electric public transport system in the country. "In the (personal) electric vehicle segment, I think the subsidy helped in getting that momentum and perhaps, it doesn't have a role right now," she mentioned.

In June, electric two-wheeler sales decreased in India by 56.3 per cent month-on-month (m-o-m) to 45,806 units, primarily due to the aforementioned price hikes. Hero Electric's domestic sales decreased by 46.18 per cent m-o-m to 1,135 units in June.

Is Hero Electric willing to work without subsidies? Munjal replied, "As long as there is a level playing field, then yes, absolutely. At this point of time, momentum is there. Momentum will go down if subsidies go immediately. There has to be a tapering down. And the way to do it is in milestone fashion, whether it is percentage of growth or any other parameter. You need to taper them down." 

"Don't keep the subsidies for too long because that spoils the entire industry as well. But at the same time, these policies have to evolve as the markets are evolving. The products are changing. The customer preferences are changing," he added.

Pillai noted that if India wants to reduce tailpipe emissions and boost the use of public transport, it needs to give a lot of attention to get polluting buses off the road, and get private sector money into making the bus fleets all electric. "Quite a few governments have announced that they want to make their bus fleets all electric but it is happening much slower than it should," she mentioned.

Rahul Bharti, executive officer, corporate affairs, Maruti Suzuki India Limited (MSIL), said during the panel discussion that the Indian auto industry is in the middle of a once-in-a-century type of transformation called "clean energy change". India had in 2021 announced that it plans to be carbon neutral by 2070.

"Electric is, of course, a major technology. Many of us, including our organisation MSIL, are developing products, localising the major components like battery. In fact, one of our battery plants is already producing local lithium-ion cells. We are also exporting. We might export EVs very soon. EVs are a major technology that can help us reach there (the 2070 target)," Bharti explained.

BluSmart Mobility is currently operating an all-electric fleet of about 4,500 cars. Its Co-Founder Anmol Singh Jaggi said that the company went for an all-electric fleet because their unit economics were far superior as compared to petrol-run or diesel-run cars.

"We really believe that unit economics on electric mobility is great, especially when we have been able to get access to finance from the best of the institutions like PFC, IREDA, etc with lowest interest cost, best repayment terms," Jaggi noted.

In December 2019, when BluSmart started operating, there were barely any EV charging points in Delhi and Bengaluru. "We have been building a lot of charging hubs now. I think we operate close to maybe 1,100 fast charging guns and 4,000-5,000 slow charging guns in Delhi and Bengaluru," Jaggi mentioned.

Bharti said that the lack of public charging infrastructure is a hurdle to the spread of EVs across India right now. "Till the time that public charging infrastructure comes up, self-charging hybrid EV can be a very potent combination. It can reduce CO2 emission by 30-35 per cent emissions, and it can cover 25-30 per cent of the population." 

"We are all betting on electric in the long term. Hydrogen could be a panacea, let's say, 20 years from now. For automobile manufacturers, it is a multi variable equation. We have several technologies, we have several segments and we have a time frame. Each such technology has a scalability attribute. It has a cost attribute. It has a customer absorption attribute. And this is what keeps us awake at night," he noted.

The MHI had in May notified that for electric two-wheelers, the demand incentive has been reduced to Rs 10,000 per kWh from June 1 onwards from Rs 15,000 before. Additionally, from June 1 onwards, the cap on incentives for electric two-wheelers has been 15 per cent of the ex-factory price of vehicles from 40 per cent before. The FAME scheme commenced on April 1, 2019, for a period of three years, which was further extended for two years till March 31, 2024.



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First Published: Jul 20 2023 | 12:31 AM IST

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