Hero MotoCorp believes that in order to sustain the nascent electric vehicle sector, subsidies are required for the electric two-wheeler industry for an extended period of time. With ambitious cost-cutting strategies in place, the automaker claims it is ready to navigate the market in a lower subsidy regime.
“EV is not the category which has matured by any stretch of the imagination. We believe subsidies would be required for a bit longer period of time to support the industry. And once it scales up to a certain level, a level which is more margin and cost viable then those can be tapered down in a gradual course,” Hero MotoCorp Chief Executive Officer Niranjan Gupta said in a post-earnings investor call.
Gupta’s remarks are made in the midst of uncertainty over what will happen to the government-provided demand subsidies after the new Electric Mobility Promotion Scheme 2024 (EMPS) expires in July. When the FAME 2 scheme ended on March 31, a new one was implemented for a period of four months. In July, the newly constituted administration will offer the whole budget for the financial year 2025; it is uncertain if this would mean the continuation of the current programme or the introduction of a third phase of FAME.
In the meantime, the government’s subsidy under the new programme is less than that provided under the FAME 2 programme. The subsidy for electric two-wheelers has been cut in half, from Rs 10,000 per kWh to Rs 5,000 per kWh, with a maximum limit of Rs 10,000 per vehicle, with the revised scheme taking effect on April 1.
“With the EMPS coming in, the subsidies are lower and FAME 3, we will see what it shapes up. But we are prepared for the reduced subsidy as well. We are also aggressively working on our cost-reduction roadmap. So, we will be stronger and independent,” Hero MotoCorp’s Chief Business Officer for Emerging Mobility BU Swadesh Srivastava said.
“People are launching products with the smaller battery. In our portfolio, that also exists and will come out in the due course of time. At the same time, it is important for us as a serious player to provide products that are desirable by the customer, the value proposition is right for that use case. And we will not compromise on the competitiveness of the product while we continue to navigate the category with the right cost reduction and pricing,” Srivastava added.
Hero MotorCorp currently has only one offering in its electric vehicle portfolio under the Vida brand. The automaker plans a portfolio of four models in this financial year with two launches expected in the current quarter. One of the scooters is likely to be in the affordable range, while the other could be in the mid-segment.
The management noted that its current product is not eligible for benefits under the government’s production-linked incentive scheme, but the products, including the newly launched ones, would be compliant with the scheme in the second quarter of the current financial year.
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