Even as the FAME II incentive scheme for electric vehicles (EVs) is fast moving towards its March 31, 2024 deadline, the FM reserved any concrete announcements on extension/FAME III as well as outlays for the future. However, the budget speech made it clear that the government’s focus in the EV space is on public transport, encouraging greater adoption of e-buses.

While 23.38 lakh EVs were sold in India in the last ten fiscals (FY14-FY23), only 0.17 per cent or 3,974 of them were e-buses. Under different phases of FAME- which has been operational since FY15 - 6,862 electric buses have been sanctioned for intracity operations across various cities and state transport units, with only 3,487 supplied as of end-November 2023. On the other hand, ambitions are lofty. Under the National Electric Bus Programme rolled out in 2022, India plans to deploy 50,000 e-buses over five years.  

What stands between ambition and action is the fact that e-buses work on an opex model (such as a leasing model with payments on kilometre basis). With finances of public transport undertakings not in great shape, e-bus makers/intermediaries have been reluctant to participate in tenders put out by the government’s nodal agency for EV procurement.

Information available in the public domain shows that in January 2023, for instance, a tender for 4,675 e-buses was cancelled due to low participation by manufacturers/operators. Concerns raised included delays in payments and lack of visibility on the same. Latest available data shows that in FY 2019-20, public transport organisations incurred a combined net loss of ₹19,726 crore. The cumulative losses stood at ₹1,22,378 crore as of March 31, 2020, primarily attributed to low tariffs and high operational costs.

In this context, the announcement of a payment security mechanism is welcome move and is positive for listed e-bus manufacturers such as Tata Motors, JBM Auto and Olectra Greentech. As of December 2023, Tata Motors has about 60 per cent share in total e-bus sales, with the share of the other two players at 25 and 12 per cent respectively.

The increasing focus on EVs has seen mid/small cap stocks JBM Auto and Olectra move up 8-16 times since the pre-Covid market peak in January 2020 as well as witness PE multiple expansion to over 100 times now. JBM Auto was up 2.5 per cent in trading on February 1. One needs to wait and watch though, for the contours of the payment security mechanism.