Bajaj Auto executive director Rakesh Sharma said the government has extended several incentives, ranging from a lower GST rate of 5% on electric vehicles (compared with 28% on two-wheelers with an internal combustion engine) to support under the FAME II (Faster Adoption and Manufacturing of Electric Vehicles) scheme, to the segment.
While these spurred sales of electric two-wheelers, he said “how the penetration moves going ahead will depend on whether incentives are continued beyond this fiscal”.
The FAME scheme is scheduled to end at the close of the ongoing financial year.
The government extends subsidies of Rs 15,000 per kWh, capped at 40% of the cost of an electric vehicle, under FAME II. For certain high-speed electric scooters, the incentives come to over Rs 40,000, keeping the vehicles more affordable. If the scheme is discontinued, manufacturers would not be able to absorb all of this to prevent prices from going up.
This, feel industry stakeholders, may stall growth in an industry which has just started seeing traction from consumers.
As many as 726,976 high-speed electric two-wheelers were sold in FY23 ended March 31 – three times the 232,000 units sold the previous fiscal year. However, penetration of electric powertrain remains modest at about 6-7% in a market where about 16 million two-wheelers were sold in the last fiscal year.Growth in the ongoing financial year is expected to remain firm with strong enquiries and bookings across dealerships. But it is likely to get impacted if incentives are stopped under the FAME II.
Bajaj Auto Urbanite Business Unit president Eric Vas said the company is looking at expanding its distribution network and putting in place 150 exclusive outlets for the EV Chetak scooters in 120 towns by September this year. The company would look at the market and calibrate again for expansion beyond these, he said. It has 105 outlets across 88 cities, at present.
Vas said a key consideration in adopting a calibrated approach was the uncertainty over the continuation of the FAME II scheme, which was extended till March 31, 2024.
The industry is of the opinion that the cost of EVs will go up significantly if the subsidy is stopped. “Prices will go up. It will stop the growth of the industry and that is why I’m saying we (Bajaj Auto) need to calibrate very carefully when we’re opening (new stores for Chetak),” Vas said.
More immediately, though, the company is optimistic of crossing the 100,000-unit sales mark for its electric two-wheelers in the ongoing financial year if supplies remain steady and demand holds up. The company is ramping up production of the Chetak and expects to manufacture 10,000 units per month by June this year, Sharma said.
He said the company had faced problems earlier due to over dependence on certain vendors, who could not supply some parts. “That we have sorted out by the first quarter and it is giving us some confidence,” he said.
Mid-term, Bajaj Auto plans to introduce more products on the Chetak platform to cater to different use cases for electric vehicles in the local market. Sharma said: “As we scale and the market develops, there will be sub-segments. We will expand the Chetak portfolio. We are focusing on developing our capabilities. We have set up a factory and are working on building a vendor base locally, which will give us clarity on supplies and also control over the cost architecture.”
Bajaj Auto closed last fiscal with sales of 36,200 electric two-wheelers. The company said the short-term priority is to build a solid foundation to ensure sustainable growth.
Bajaj Auto has hived off its electric vehicle division as a separate subsidiary, Chetak Technologies. The two-wheeler maker has invested Rs 300 crore to commission a dedicated facility for manufacturing EVs at Akurdi, Pune. The facility can make 500,000 units a year.
News Source: economictimes.indiatimes.com