Electric car business is profitable, more orders in pipeline: EESL

EESL, which is procuring 10,000 electric cars from Tata Motors and M&M for leasing them to government offices, said it is earning a 14 per cent post tax return on the equity investment made in the business and there is no adverse feedback from any user of 150 e-cars in the national capital region (NCR).

“Most of the users of the 150 cars in the NCR are in the rank of joint secretary or above in the government. So far no issue has been brought to our notice with regard to mileage or otherwise. These cars are certified by ARAI and the manufacturers have a reputation to maintain,” Saurabh Kumar, managing director at EESL told Business Standard.  About 450 more cars will be leased to users in the NCR.

Kumar said the manufacturer claimed mileage of any vehicle is arrived by using in standard test conditions and these results cannot be replicated in actual driving conditions. “The stated range of an electric vehicle is also based on standard test conditions. 130km is the standard in case of these two cars (e-Verito and e-Tigor). If you drive as per the standard conditions you will get that. But these conditions are not there in city run and what you get is 10-15 per cent lower than the range claimed,” he added. EESL claims the 150 e-cars in the capital region have cumulatively clocked a distance of 700,000 kilometres as per the lease agreement of 80km per day per vehicle for 25 days a month.

EESL said the list of government departments that wants to use these cars continues to expand. It has leased vehicles to ministry of power, fifteenth finance commission and Niti Aayog among others in the capital. Kumar said EESL has got demand from the department of heavy industry and ONGC as well. Outside the union government, EESL has also signed lease agreements with PWD (in Maharashtra), Greater Hyderabad Municipal Corporation (Telangana) and the government of Andhra Pradesh. EESL is in talks with states like Gujarat, Madhya Pradesh and Uttarakhand as well to lease e-cars.

EESL pays an upfront amount of 90 per cent cost of a car (Rs 1.12 million) to the manufacturer while the payment of the remaining ten per cent is phased. EESL, a company floated by power public sector undertakings, is putting 20 per cent equity for these purchases while the rest is debt. “All the costs, including debt, driver and insurance, etc are passed to the user and we make a 14 per cent post-tax return on the capital employed”.  

EESL will receive deliveries of all the 10,000 e-cars for which the tender was finalised in last year October by March 2019. “Andhra Pradesh is expected to be our single largest customer. They have indicated total orders of 10,000 cars and they are identifying government departments that will use these cars. The state has also waived registration charges and road tax on e-vehicles recently,” said Kumar. He said the state had delayed the process as it was waiting for the waiver of these charges.

Tata Motors and M&M, Kumar said, have indicated they can make 500 cars each per month to begin with. “They are willing to ramp up if there is more demand. We do not need more than 1,000 a month to complete the first tender order by March. The fate of the second tender will depend on the revised charging specifications that will allow us to bring bigger electric cars with a higher range,” he added.

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