SMEV welcomes MHI's efforts to restore status quo

The Society Of Manufacturers Of Electric Vehicles SMEV has today welcomed the move by the Ministry to start settling pending issues of OEMs and bring the sector back to its feet. “The beginning of resolution of disputed issues for OEMs augurs well for the sector”, said Sohinder Gill, Director General SMEV. “It is time that the sector is allowed to stand on its feet again and efforts to revive the E-Mobility sector can begin”, he added.

Terming the news about the Ministry giving clean chits to various companies as a move in the right direction, Gill said that the sector was desperate for a resolution of the subsidy blockade that has all but choked the sector for the last 15 months.

MHI must now help to rehabilitate market leaders

Companies like Hero Electric, Okinawa, and Ampere who were market leaders in FY19 and FY20 with 82% share of the market have reported drastic drop in sales and were able to muster only 24% market share in April ‘23. If these companies are not revived, the organisations that built the EV ecosystem for the initial 10 years or more may have to shut down, setting a bad example in the EV world, including the global investment funds.

MHI’s decision to take a practical view of the limitations and difficulties of OEMs is a good step and will bring a much-needed relief to the sector.

Applauding the attempts of the Ministry to reconcile policy with ground realities, Gill said, “There are various ways to look at the issues relating to the subsidy and pricing but at a basic level they are simple teething troubles of a nascent industry.”

No discrepancy in passing subsidies

Gill said it was important to understand that OEMs were passing on subsidies fairly and honestly. “There is not a single case of any OEM not passing on the subsidy to customers. That is a fact and has not been challenged by anyone so far.”

He said that the idea that there was an attempt to profit from importation as has been made out has no basis in reality.

Debunking the import story

All OEMs prefer to buy locally – rather than import. Importation is an expensive and dicey affair with currency issues, customs and duty additions, time lag, delays, spare shortages, guarantee and warranty complications, and above all, pricing is always cumulatively higher.

The issue of localisation has been magnified to become a China-centric debate among some quarters. This myth must be debunked.

Importation is allowed under FAME II. That is a fact. Even today, 50% of the EV is officially allowed to be made up of imported components.

Tapered localisation can be a sustainable option

Logically it should have been much higher to start with - say 70 -80% as the supply chain was not existing at that time and allowed to progressively taper down to 50%.

Unfortunately, this was not the case with FAME II PMP norms that mandated item by item localisation conditions which were tougher to meet and created supply bottlenecks that led to OEMs scrounging for parts and which in turn created the issues OEMs are facing today.

Force-localisation is dangerous

Force-localisation comes with dangers, as we have seen some OEMs trying to procure locally at the cost of quality components that have resulted in fires and short circuits and parts that have required to be recalled later.

The solution is a flexi-policy approach, until total localisation can occur

In 2019 when the FAME policy was launched, there was no supply chain. The subsidy scheme was a non-starter. Then two years of COVID finished off the market and it is only in late 2022 that the supply chain could sustain the 50% localisation efforts of the OEMs.

The Ministry has been cognisant of the ground realities and that is why the extensions provided by it sustained the sector in 2021. However, with the unfortunate controversy created by anonymous emails and the actions of the Ministry, the entire sector collapsed in 2022.

The Ministry may also consider offering incentives to local enterprises to ensure that a sustainable manufacturing eco-system can be created, said Gill.