For India to become a global player in electric cycles, manufacturers should be eligible for the government’s automotive production linked scheme or PLI.
That is the message manufacturers, led by Hero Motors, have sent the government, warning that otherwise the country will miss out on a huge opportunity.
Pankaj Munjal, managing director of Hero Motors, one of the largest cycle manufacturers in the world, said the demand has a strong basis: “We have committed exports of Rs 30,000 crore of electric cycles annually as an industry and 1 million electric cycles for the domestic market at Rs 15,000 a piece to the government if we are included with electric vehicles
in the PLI scheme and also extended the FAME 2 incentives.”
Munjal predicts that the electric vehicle market in India for two and four wheelers will only grow to 20-odd cities as ‘it can never be a mass movement at a price of Rs 1 lakh’.
“However,” he added, “if FAME 2 incentives are given to us, we will offer electric cycles at Rs 15,000 instead of the prevailing Rs 25,000 earlier and the market will explode.”
The Indian cycle industry (including e-cycles) is estimated to be 22 million units pa with revenues of $1.3 billion.
Munjal says users will travel longer distances for employment, delivery boys can increase the number of deliveries they make and there is no range anxiety as there is with two wheelers. On an average, the batteries can power a cycle for 50-70 kms and after that, pedaling with your feet is an option.
He says the manufacturers’ demand is supported by Niti Aayog and the Ministry of Industry and Commerce.
Hero itself has committed that it will export one third of the value committed by the industry annually for exports. Munjal says it is lamentable that currently no electric cycles are exported at all.
The automotive PLI has raised issues even among start-up electric vehicle two wheeler companies
such as Ather Energy and Hero Electric (the other Munjals) who have also petitioned the government for tweaking the PLI rules. However, they fear that the stiff conditions of revenue and net worth will virtually exclude non-legacy players such as themselves from qualifying for incentives.
Munjal says that the current gap in the cost of production between India and China ranges from 8-25 per cent, depending on the components. What the PLI incentive scheme would do is help kickstart the production expansion of electric cycles. Vendors will come in and manufacture in volumes, an eco-system will be built, and prices will fall.
He points out that, despite these drawbacks, his company still manages to sell over Rs 1000 crore of electric cycles in Europe, a large part of it at the top end of the market with prices between Rs 1-8 lakh. By 2024, he expects to hit revenues of 250 million euros.
To meet this demand, Hero Motors has had to set up an assembly plant near Berlin and has finalised a deal to acquire a manufacturing facility in east Europe where it will be producing over 300,000 electric cycles.
It has acquired European brands such as HNF, Viking, and Insync to sell in the European market because its strategy - since it is not a well-known brand in this market - is similar to Tata which sells the Land Rover without the Tata name.
In talking about Europe, the point Munjal is making is that, had Hero Motors received PLI incentives, it could have set up a plant in India and exported these cycles to markets across the world instead of having to invest Rs 350 crore in Europe.
The company has invested over Rs 1000 crore to build his cycle infrastructure, including a tripartite venture with Yamaha and Mitsui to make battery management systems and motors in Ludhiana in Punjab. It has also set up a vendor factory for components in India.
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