Hero Electric - For those who follow our content, All of you know them. They are India’s largest selling electric scooter brand in the Country. Mr Naveen Munjal, managing director at Hero Electric, released a press statement with a headline "Hero Electric Puts On Hold Investment Of Up To Rs 700 Crore For A Year". You can read the article here.
Essentially Hero Electric is blaming the FAME 2 government subsidy scheme on poor sales of his product.
Essentially Hero Electric is blaming the FAME 2 government subsidy scheme on poor sales of his product.
Video : Hero Electric wants subsidies on low speed electric scooters | Musings #10
Mr Munjal's FAME 2 Blame Game
So let’s see what Mr Munjal says
"FAME II has not delivered for sure. The policy has to be completely changed. What we have been saying is that it has to be the low-speed vehicles, which have to be targeted for masses. If you have to really make this industry work, you have to focus at the base of the pyramid and the base is the low-speed. Everything else can ride on top of it. When we look at electric two-wheeler mobility around the world, it is all low-speed, High-speed EVs are expensive, thereby making it unsuitable for a "price sensitive" market like India.”
Wow. So Mr Naveen Munjal has certainly come to the media with all guns blazing
about the poor sales of Hero Electric Scooters and how his company has wiped out a year from his balance sheets.
He cites FAME 2 scheme as the major reason for this. Interesting.
Just a refresher for those who dont know, FAME 2 incentives will be provided if 2 wheeler OEMs meet the following main criterias
So in our perspective, FAME 2 is a fantastic incentive for these companies to make in India and get them certified in India, instead of just importing from abroad and dumping inferior products that don’t work for India.
Let's take a look at the FAME 2 numbers on the Department of Heavy Industry website.
As you can see there are around 9000 FAME 2 compliant EV’s sold from - this includes cars, 3 wheelers and 2 wheelers. What we know is the number is close to 5000 for two wheelers.
An interesting side note is that only in Karnataka and TN state, you have L2 category for 2 wheelers where you have 1642 and 249 sales respectively which indicate Ather 450 numbers as they are the only ones operating from Bengaluru and Chennai.
No other state has L2 category apart from AP which has L2 category with one 2 wheeler sold - Maybe Avera Retrosa? You guys tell me.
So let’s see what Mr Munjal says
"FAME II has not delivered for sure. The policy has to be completely changed. What we have been saying is that it has to be the low-speed vehicles, which have to be targeted for masses. If you have to really make this industry work, you have to focus at the base of the pyramid and the base is the low-speed. Everything else can ride on top of it. When we look at electric two-wheeler mobility around the world, it is all low-speed, High-speed EVs are expensive, thereby making it unsuitable for a "price sensitive" market like India.”
Wow. So Mr Naveen Munjal has certainly come to the media with all guns blazing
about the poor sales of Hero Electric Scooters and how his company has wiped out a year from his balance sheets.
He cites FAME 2 scheme as the major reason for this. Interesting.
Just a refresher for those who dont know, FAME 2 incentives will be provided if 2 wheeler OEMs meet the following main criterias
- Scooters need to have percentage of localisation in India
- Obtain certificate form testing agencies - ARAI/ICAT
- Offer 3 year warranty on battery and vehicle
So in our perspective, FAME 2 is a fantastic incentive for these companies to make in India and get them certified in India, instead of just importing from abroad and dumping inferior products that don’t work for India.
Let's take a look at the FAME 2 numbers on the Department of Heavy Industry website.
As you can see there are around 9000 FAME 2 compliant EV’s sold from - this includes cars, 3 wheelers and 2 wheelers. What we know is the number is close to 5000 for two wheelers.
An interesting side note is that only in Karnataka and TN state, you have L2 category for 2 wheelers where you have 1642 and 249 sales respectively which indicate Ather 450 numbers as they are the only ones operating from Bengaluru and Chennai.
No other state has L2 category apart from AP which has L2 category with one 2 wheeler sold - Maybe Avera Retrosa? You guys tell me.
White - 2015 Hero Photon
OEM's are subsidy middle men
Anyway back to the topic in hand, Hero Electric currently has a portfolio of 3 scooters that meet FAME 2 requirements - those are Photon LP, Optima HS and NYX HS.
The on road prices have been fluctuating ever since they were launched. Few months back the Photon LP costed Rs 78,000 onroad and now its Rs 82,000.
Hero Electric also have low speed vehicles that don't qualify for FAME 2 subsidy like - Flash, Optima, and the newly launched Dash - which go upto 30 kmph and sell for around 55,000 to 60,000.
Now naturally a large part of the market will prefer spending less on a scooter and thus Hero Electric will sell more low speed scooters than high speed scooters.
So technically, if you think about it, Mr Munjal is right - we need to support people buying low speed EV’s.
So a Dash costs Rs 60,000 Dash and if subsidies are offered even for low speed scooters, then Hero Electric can sell it for Rs 45,000, making it more attractive for more people to ditch their pollution scooters for an electric.
Imagine having a Lithium battery based scooter that costs Rs 45,000, they can use the battery for 5 years, thats actually pretty attractive right? In a way Mr Munjal is right, getting these sticker prices low, would benefit more people to think about getting EV’s.
But here’s the thing, many of these OEM’s try to cut corners to increase their margins in typical corporate manner - for instance not adhering to the subsidy process or taking it seriously.
You must be thinking - ‘Hang on Kamlesh, you are just speculating. OEM’s won't do that’
Okay...what if I show you this notice from the Department of Heavy Industries.
This was a notice on December 23rd 2019.
To all the FAME 2 registered OEM’s. It has been reported to this department by many dealers that OEM’s are not passing subsidy to dealers and transfer the same only after receipt of reimbursement of incentive from the Department of Heavy Industries. It has been observed that OEMs/Dealers are not strictly following the above guidelines. This amounts to violation of guidelines/instructions issued by the Department.
So dealers are not getting the incentive, they are not passing it to the consumers. The consumer has no clue. They think that the price mentioned by the dealer is the price after subsidy. This is an issue, where the OEM’s are not taking the subsidy process seriously.
And that is why the Department of Heavy Industries wants OEMs to sign an undertaking, every OEM has to sign this. Something like an oath. I still feel incentives have to go directly from DHI to the consumer. That would be ideal. We could bypass the middleman out of the subsidy system. But okay, atleast the Department of Heavy Industries came up with this notice. Thats good.
Anyway back to the topic in hand, Hero Electric currently has a portfolio of 3 scooters that meet FAME 2 requirements - those are Photon LP, Optima HS and NYX HS.
The on road prices have been fluctuating ever since they were launched. Few months back the Photon LP costed Rs 78,000 onroad and now its Rs 82,000.
Hero Electric also have low speed vehicles that don't qualify for FAME 2 subsidy like - Flash, Optima, and the newly launched Dash - which go upto 30 kmph and sell for around 55,000 to 60,000.
Now naturally a large part of the market will prefer spending less on a scooter and thus Hero Electric will sell more low speed scooters than high speed scooters.
So technically, if you think about it, Mr Munjal is right - we need to support people buying low speed EV’s.
So a Dash costs Rs 60,000 Dash and if subsidies are offered even for low speed scooters, then Hero Electric can sell it for Rs 45,000, making it more attractive for more people to ditch their pollution scooters for an electric.
Imagine having a Lithium battery based scooter that costs Rs 45,000, they can use the battery for 5 years, thats actually pretty attractive right? In a way Mr Munjal is right, getting these sticker prices low, would benefit more people to think about getting EV’s.
But here’s the thing, many of these OEM’s try to cut corners to increase their margins in typical corporate manner - for instance not adhering to the subsidy process or taking it seriously.
You must be thinking - ‘Hang on Kamlesh, you are just speculating. OEM’s won't do that’
Okay...what if I show you this notice from the Department of Heavy Industries.
This was a notice on December 23rd 2019.
To all the FAME 2 registered OEM’s. It has been reported to this department by many dealers that OEM’s are not passing subsidy to dealers and transfer the same only after receipt of reimbursement of incentive from the Department of Heavy Industries. It has been observed that OEMs/Dealers are not strictly following the above guidelines. This amounts to violation of guidelines/instructions issued by the Department.
So dealers are not getting the incentive, they are not passing it to the consumers. The consumer has no clue. They think that the price mentioned by the dealer is the price after subsidy. This is an issue, where the OEM’s are not taking the subsidy process seriously.
And that is why the Department of Heavy Industries wants OEMs to sign an undertaking, every OEM has to sign this. Something like an oath. I still feel incentives have to go directly from DHI to the consumer. That would be ideal. We could bypass the middleman out of the subsidy system. But okay, atleast the Department of Heavy Industries came up with this notice. Thats good.
| Are Hero Electric Serious So as you can see passing on subsidy to the consumer is not the highest priority for these OEMs. And when sales are under performing, the best thing to do is to go to the media and complain. EV’s are not selling, we won't be investing in EV’s, it's the government’s fault etc etc And the mainstream media fuelled by BIG ICE and BIG OIL love it. They will take any opportunity they can to thrash EV’s. So here are some questions I would like to ask Hero Electric Hey, Hero Electric
Remember this is the same Hero Electric that
So PluginIndia viewers, we have a poll on our home page of the website asking you if low speed scooters need subsidies. Do go and cast your vote. Also comment below on your thoughts on what Mr Munjal said and also your suggestions to Hero Electric. We would love to hear from you! Until next time. Signing off. |  Black - 2019 Hero Photon |
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