Companies

CESL’s e-bus tender: Competition charge to match Tata Motors’ L1 bid price

Swaraj Baggonkar | | Updated on: Jun 14, 2022

Electric bus at a stop is charged by pantograph. Vector illustration EPS 10 | Photo Credit: Scharfsinn86

But e-vehicle makers raise doubts over profitability

Mumbai, June 14Following a sweep by Tata Motors of the largest electric bus tender floated by state-backed CESL, some competing firms have matched the L1 bid, while others have raised questions about the aggressiveness of the quote.

Two of the bidders have now matched the prices quoted by Tata Motors, which had emerged the L1 bidder for all the five categories of the tender floated by Convergence Energy Services for 5,450 electric buses valued at over ₹5,000 crore.

VE Commercial Vehicles, the joint venture between Volvo and Eicher, and Olectra Greentech-backed Evey Trans, have matched Tata Motors price and stand to get a share of the total order.

Vinod Aggarwal, Managing Director and CEO, VE Commercial Vehicles (VECV), said, “The EV business is of strategic importance to us. There are areas where we think we can save (on costs). We can run the buses for a greater number of kilometres, increase the life of the battery and benefit from the PLI scheme on electro mobility.”

Ball in STU court

CESL Managing Director Mahua Acharya said, “VECV and Olectra have agreed to match the L1 prices. Unlike other tenders, this is backed by real demand from STUs (State transport undertakings). I am waiting for cities to tell me that they have approvals from their respective authorities and are good to go on the price.”

CESL declared the lowest discovered price for a 12-metre bus at ₹43.49/km, whereas for a 9-metre bus it was ₹ 39.21/km. The same for a diesel-powered bus is ₹75/km. The contract term is for 12 years, with assured 10-lakh km per bus. However, Hinduja Group flagship Ashok Leyland has decided to stay out of the tender over margin concerns. Speaking to analysts Executive Chairman Dheeraj Hinduja said, “We have been operating electric buses for three years. We understand the operational costs and the right pricing model for general condition contracts. Since tenders are long-term agreements, we want to make sure that they will be positively adding margins for us. Some of these tenders are going on an aggressive basis. We are not participating in a price war.”

But Tata Motors claims it can run the operations profitably at the rates quoted. Last month the company even incorporated a wholly-owned subsidiary TML Smart City Mobility Solutions for the urban mass mobility business under an own-operate-maintain model.

Girish Wagh, Executive Director, Tata Motors, said, “We have a team of almost 100 who look at each cost element. We looked at optimising each cost element, bringing in efficiency before being able to come to the most efficient kind of number, which we’ve quoted (in the tender). We are quite confident of not just delivering on this, but also to making money at these rates.”

Good chance for TaMo

Independent Analyst Mahantesh Sabarad said, “CESL has long-term plans that envisage procuring 50,000 buses over 10 years. By bidding low prices, Tata Motors stands a good chance to grab a major share of those 50,000 buses providing a solid base to absorb associated fixed costs. High volumes ensure they cross breakeven volumes comfortably. That’s one reason why they could be profitable.”

VECV, Ashok Leyland, Evey Trans were the bidding companies for the prized CESL tender in addition to Tata Motors. Mahindra & Mahindra, Daimler India Commercial Vehicles and PMI Electro Mobility did not participate in the tender.

Published on June 14, 2022
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