India’s largest two-wheeler maker Hero MotoCorp believes subsidies are necessary for the electric two-wheeler industry for a longer time period to support the fledging electric vehicle market. The automaker says it is prepared to navigate the market in a lower subsidy regime with aggressive cost-cutting plans in place.
“EV is not the category which has matured by any stretch of the imagination. We believe subsidies would be required for a bit longer to support the industry. And once it scales up to a level which is more margin and cost viable, then those can be tapered down in a gradual course,” Hero MotoCorp CEO Niranjan Gupta said in a post-earnings investor call.
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Gupta’s comments come amid uncertainties regarding the fate of the subsidy given by the government after the expiration of the new Electric Mobility Promotion Scheme 2024 in July. The new scheme was rolled out for four months after the FAME 2 scheme expired on March 31, but it is unclear whether the new scheme will be extended or a third phase of FAME will be launched when the newly formed government presents the full budget for FY2025 in July.
Meanwhile, the subsidy given by the government through the new scheme is lower than the FAME 2 scheme; the subsidy for electric two-wheelers has been halved to Rs 5,000 per kWh from Rs 10,000 per kWh with a maximum limit of Rs 10,000 per vehicle.
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Hero MotoCorp’s chief business officer for Emerging Mobility, BU Swadesh Srivastava, said, “With the EMPS coming in, the subsidies are lower and we will see what shape the FAME 3 takes. But we are prepared for the reduced subsidy as well. We are also aggressively working on our cost-reduction roadmap, so we will be stronger and independent.”
Hero MotorCorp currently has two offerings in its electric vehicle portfolio under the Vida brand. The automaker plans a portfolio of four models in this financial year with two launches expected in the current quarter. One of the scooters is likely to be in the affordable range, while the other could be in the mid-segment.
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The management noted that its current product is not eligible for benefits under the government’s production-linked incentive scheme, but the newly launched products would be compliant with the scheme in the second quarter of the current financial year.