‘PLI creating a non-level playing field for startups and MSMEs’: Sohinder Gill

Reaching the target of 2.3 million electric vehicles by 2024 seems difficult now, particularly with the "near absence of the incumbent market makers whose share of the pie has dwindled to a single digit. Sohinder Gill, Director General  of the Society of Manufacturers of Electric Vehicles (SMEV) and the CEO of Hero Electric is also equally optimistic discusses at length the issues of subsidy and PLI Scheme, with Autocar Professional, besides giving an overview of the state of the EV sector in the country.

Can the domestic electric two-wheeler manufacturers withstand the combined impact of a watered-down FAME II subsidy and PLI implementation delays?
The reduction in the subsidy, uncertainty of when FAME III will be launched and the delay in disbursement of the PLI scheme — all add up to avoidable obstacles in the growth trajectory. Such hurdles in the early nurturing stages do not augur well for the industry and the country.

While painting a rather dismal picture, he is also equally optimistic for a clear recovery path, under the leadership of the Minister of Heavy Industries, who has been instrumental in pushing for a comprehensive growth of EVs despite all odds.

What could be the consequences of delay in implementing the US$3 billion PLI scheme as well as the uncertainty about incentives for legacy and new-age electric two-wheeler OEMs?
PLI seems to be a game of ‘big fish-eating small ones’, by creating a non-level playing field and is another reality to reckon with by the start-ups and MSMEs who have been kept out of a good scheme.

Many leading EV players were unable to participate in the PLI scheme, originally because of the stringent eligibility norms. This is a challenge these players have been facing because of the threshold criteria of a minimum turnover of Rs 10 crore. This automatically eliminates the new-age two-wheeler OEMs and EV start-ups. The early start-ups are already suffering and are unable to qualify under PLI.

Can the industry beat the above-mentioned obstacles and reach the two million E2W target by 2024?
Reaching the ambitious 2.3-million units e2W target by 2024 seems to be difficult now, due to the near absence of the incumbent market makers whose share of the pie has dwindled to a single digit, if their issues are not quickly resolved. While we may be able to do better than FY23, we will certainly lose the growth trajectory that the industry had recently witnessed and fall short of the mid-term target of 25 percent to 30 percent adoption of E2W in the next few years.

Would you agree that OEMs who have a better grip on the low-speed electric two-wheeler market would be better placed to handle the stress for the time being?
The issue probably is the total absence of any regulatory controls in the low speed bike segment that encourages ‘fly by night operators’ dumping unsafe, poor quality, and unregulated products in the market.

I would encourage serious OEMs to relook into their portfolio to include low-speed bikes that are built with the ,same technology and quality standards as their high speed, and not cut corners just to make them cheap just because there is no subsidy on the low-speed.

What is your broad outlook for electric two-wheelers in the current market?
The market that had just emerged from the safety and fire issues has now got entangled in the subsidy fiasco — it is trying to find its ground. Currently, only the new-age players enjoy whatever tapered subsidy is available and many incumbents are still passing on subsidies to the customers without getting a rupee back from the government for over a year. 

Some OEMS with deep pockets may try to monopolise the market through deep discounts, which could crowd out the smaller players. This (subsidy) issue, if unresolved, may lead to the incumbents rolling back their production plans, creating a further dent in the supply.

How important is the PLI for the sector to achieve its target of 30 percent electrification by 2030?
I don’t think PLI alone can help us achieve this target. A slew of measures will be needed to achieve this. Some direct sops to the customers for a few years, ecosystem support, and awareness are all part of the solution.

Without the PLI scheme and FAME incentives, do you see two-wheeler OEMs facing another 20–25 percent round of cost push-up in the current year?
The costs are not increasing on the input side if volumes go up, we may see some scale advantage. When the costs get translated into the Ex-showroom prices, the EV becomes out of reach of a majority of buyers who still have the option to go for a much cheaper ICE vehicle.

The country has to recalibrate its strategy if we are serious about achieving substantial growth in EVs. The TCO (total cost of ownership) advantage has not yet been set into the minds of the customer, in fact, TCO indeed is not that favourable for premium vehicles whether cars or E2Ws, except in commercial applications.

Should the government extend PLI benefits to start-ups as well?
The scheme will help established companies reap benefits while start-ups and pure EV players will be left without. It creates an uneven playing field, where established companies can pass on the benefits to their customers, further strengthening their position in the market.

Does the industry need to migrate to a much simpler structure, preferable to the current Auto PLI scheme's technical challenges of providing bills of entry, import, and revenue details for Tier I suppliers?
Any scheme that is investment-driven needs major impetus and must be looked at much more microscopically by the government. As regulators, we are all confused even on what localisation should be defined as. It opens up a Pandora’s box on what sort of machinery should be used by the government to resolve such issues.

A simpler way, in my opinion, would be to slowly keep increasing import duties to create a price arbitrage for the local industry to thrive. We must all learn from the FAME II debacle and try to do better.

What impact do you see from this uncertainty on the EV component industry, which was also looking up to PLI to bolster its operations?
We saw a similar challenge back in 2019 when the component industry was not keen on participating owing to lower volumes and an unpredictable future. However, when volumes grew, the interest grew too in 2021- 2022.

Since India is striving to become a global manufacturing hub for EVs and related components, uncertainty in the policy framework may affect the competitiveness of the Indian EV component industry compared to other countries that offer more stable and attractive investment environments.

What has your experience been in working with agencies like the IFCI? What have your learnings been in incorporating faster changes for the industry?
The overall experience has been positive, and the planning phase has been smooth and effective, but challenges have arisen during the implementation stage.  Any appointed agency should be well-acquainted with ground realities and be involved right at the outset and even during the agreed tenure to be able to understand the nuances and act accordingly.

This interview was first published in Autocar Professional's June 15, 2023 issue.