Hero Electric–India’s largest manufacturer of electric two-wheelers by volumes sold—had a rather unpleasant surprise waiting for it in the new year. A report published on 2 January claimed that the OEM (original equipment manufacturer) has all but halted its Rs. 700 crore ($97.4 million) investment in ramping up production capacity from 100,000 units per year to 500,000. The report suggested that with the introduction of phase II of the Faster Adoption and Manufacture of (Hybrid &) Electric Vehicles (FAME-II) policy, the Indian government’s flagship electric vehicle (EV) policy, Hero’s sales had taken a huge hit.

Naveen Munjal, managing director of Hero Electric, outright denied any reports of slowing down. In fact, he claimed the opposite. “This year, we will do more volume than ever before. Almost 30-40% more,” he told The Ken in an interview.

 “We are re-strategising to become subsidy agnostic,” says Munjal, confidently.

Munjal’s positive outlook notwithstanding, FAME-II has caused an unprecedented blood bath in India’s EV two-wheeler space since its announcement in March 2019. It imposed strict conditions around speed, range, and battery size on OEMs looking for a share of the Rs 10,000 crore ($1.4 billion) subsidy pool the policy provided. The policy was meant to catapult the EV sector towards mass adoption. Instead, it brought the space to a grinding halt. Sales plummeted 94% according to the Society of Manufacturers of Electric Vehicles.

No company has been more hurt or more vocal than Hero about FAME-II’s impact on the market. “FAME-II wants to electrify commutes in India. But the policy excludes a majority of the vehicles. Hero is raising a red flag through its public comments,” says Avik Chattopadhyay, a Delhi-based EV industry expert.

According to a report on the policy by ratings agency CRISIL, almost 95% of the low-cost, low-speed EV two-wheelers are not eligible for the subsidy. Hero has at least eight such scooter variants (out of 12) in its stable, alongside smaller, regional players like Ampere, Yo, Avon and Jitender.

“At a minimum top speed of 40 km/hour and a range of 80 km per charge, FAME-II has picked high-speed, high-performance scooters over low-speed ones. They don’t want to clog Indian roads with slow-moving scooters that can only achieve a top speed of 25 km/hour,” said an auto industry lobbyist, who wished not to be named since he’s not authorised to speak with the media.

FAME-II may have Hero in an uncomfortable spot. But it’s created a rather comfortable niche for high-speed, high-performance EV players like Ather, who are pulling the EV market in the opposite direction. If lower prices are Hero’s shield, Ather’s currency comes from its high-performance specs, albeit at a higher price point.

AUTHOR

Olina Banerji

Based in Delhi, Olina writes about mega-trends in urban mobility, education, skilling and the environment, with a focus on how institutions and innovations can help cities grow sustainably. She is a graduate of the London School of Economics, and has worked previously with India Today and global non-profit Ashoka.

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