Subsidies needed for longer time to support EV industry, says Hero MotoCorp

India’s largest two-wheeler maker Hero MotoCorp believes subsidies are necessary for the electric two-wheeler industry for a longer time frame to support the fledgling 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 period of time to support the industry. And once it scales up to a certain level, a level which is more margin and cost viable then those can be tapered down in a gradual course,” Hero MotoCorp Chief Executive Officer Niranjan Gupta said in a post-earnings investor call today.

Gupta’s comments come amid uncertainties regarding the fate of the demand subsidy given by the government post-expiration of the new Electric Mobility Promotion Scheme 2024 (EMPS) in July. The new scheme was rolled out for four months after the FAME 2 scheme expired on March 31. 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 the financial year 2025 in July.

Meanwhile, the subsidy given by the government through the new scheme is lower when compared to what was given through the FAME 2 scheme. With the new scheme coming into effect from April 1, 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.

“With the EMPS coming in, the subsidies are lower and FAME 3, we will see what it shapes up. 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 MotoCorp’s Chief Business Officer for Emerging Mobility BU Swadesh Srivastava said.

“People are launching products with the smaller battery. In our portfolio, that also exists and will come out in the due course of time. At the same time, it is important for us as a serious player to provide products that are desirable by the customer, the value proposition is right for that use case. And we will not compromise on the competitiveness of the product while we continue to navigate the category with the right cost reduction and pricing,” Srivastava added.

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.

The management noted that its current product is not eligible for benefits under the government’s production-linked incentive scheme, but the products, including the newly launched ones, would be compliant with the scheme in the second quarter of the current financial year.