Hero Electric: ₹700-cr investment on hold by a year as FAME II failed to deliver

Leading electric two-wheeler maker Hero Electric has put on hold investment of up to ₹700 crore by a year with the sector taking a nosedive as FAME II — the scheme aimed to promote electric vehicles — has failed to deliver, according to a top company official.

Calling for a complete revamp of the policy, the company urged the government to include low-speed two-wheelers for subsidy arguing that for mass adoption of electric vehicles (EVs) in India these cost-effective vehicles are critical.

“From an industry standpoint, there was a certain trajectory which was going on when we had FAME I. With the coming in of FAME II, whatever be the logic and reason, the manner in which FAME II was introduced, the whole industry took a downturn and now the industry is recovering from that,” Hero Electric Managing Director Naveen Munjal told PTI.

According to the Society of Manufacturers of Electric Vehicle (SMEV) data, sales of FAME II-qualified electric two-wheelers in April-December 2019 period stood at just 3,000 units as against 48,671 units in the year-ago period when FAME I was in place — a decline of 93.84 per cent.

Under FAME I, low speed two-wheelers with top speed of up to 25km/hr had qualified for incentives of up to ₹17,000 and ₹22,000 for high-speed ones.

However, under FAME II, which came into effect from April 1, 2019, electric two-wheelers are mandated to have a minimum range of 80 km per charge and minimum top speed of 40 kmph to qualify for an incentive of ₹20,000.

Munjal cited examples of Europe, China, US and Japan, where low-speed electric two-wheelers are supported by the government for mass adoption.

Rating agency Crisil had predicted that more than 95 per cent of the electric two-wheeler models produced earlier would not be eligible for incentive under FAME-II.

When asked about the impact on the company’s future investments, Munjal said, “we had to push back the plans. Fund raise has been pushed back to next year, so are the investments.”

Earlier in August 2019, the company had said it was looking to invest around Rs 700 crore in the next three years to ramp up production capacity of its electric scooters to 500,000 units annually from about 100,000 units. It was looking to raise fund for the same by roping external investors.