‘Electric Mobility Should be Included in Swachh Bharat Abhiyan’

Hero Electric, the market leader in the Indian electric two-wheeler Industry, offers a wide range of products manufactured at its facility at Ludhiana. Naveen Munjal, Managing Director, Hero Electric talks to BW Businessworld’s Siddharth Shankar and Avishek Banerjee about the electric mobility landscape In India, challenges, opportunities, and the way forward. Excerpts:

Is the recent surge in fuel prices giving a boost to EVs?
The recent fuel price hikes had a positive impact on the entire EV industry. Our dealerships have reported a surge in demand and a 50 per cent increase in footfalls across markets as the consumers want to curb their expenses and are seriously considering efficient mobility options which are economical to buy and have low running costs. Our numbers for March as per company billing are 8,500 and in terms of retail sales 10,500 units. The fuel price hike is only a temporary trigger that has made buyers take more interest in electric vehicles. While petrol prices may continue to rise in future as well, the real change drivers for the industry are EV’s efficiency, ease of use, and environmental benefits over fossil fuel-guzzling vehicles.

What do you think are the pain points the Indian electric vehicle industry is facing right now?
There are numerous pain points and one of them has been lack of financing (for EVs). When we look at our counterparts, I see that majority of the vehicles are financed but when you look at EVs, the financed vehicles account for less than 5 per cent of the total sales. There are two ways to look at this: one, because it didn’t exist yet we see substantial growth. Second, it also means that whenever financing for EVs takes off, we will see phenomenal growth because financing plays a very important factor in the purchase process.

The second major factor is lack of awareness among people. One of the things that we’ve been telling the government is that when you’re talking about the Swachh Bharat programme, you’re talking only about environmental cleanliness. Why are we not talking about air pollution as well? We should make electric mobility and clean mobility a part of the Swachh Bharat mission.

When does your company plan to start producing lithium-ion batteries?
See, our business model does not allow us to get into battery manufacturing. When you look at the whole space, the whole ecosystem of electric mobility, either you can be a technology player or you could be a supplier, you could be an automotive company or you could go into services like charging infrastructure etc. For you to have a play in those baskets means you’ve got to be a multi-billion-dollar company with all of them having separate teams because the skill sets are totally different. So, like I said, we’re never going to get into (lithium-ion) cell manufacturing ourselves, we will rely on other specialist companies to do
that.

What measures are you taking to build a robust support system for EVs?
From a larger ecosystem point of view, apart from training our own dealers and their staff in addressing concerns of the consumers, we wanted to also enable our roadside mechanics to be able to service electric scooters as well. Since these mechanics are currently only skilled to work on the ICE vehicles, creating Preferred Garage Owners (PGO) and training them across various cities, localities and neighbourhoods will help build confidence with our customers to enable them to choose electric vehicles as their vehicle of choice. Reskilling and creation of these PGOs will enable these mechanics to cater to the growing EV sector as well and enhance their skillsets so as to make a better living and adapt to the changing world as quickly as possible.

Is your company earning profits?
Every model that we sell there is a healthy gross margin, which is in line with what the automotive industry earns. The only issue here is our scale. Our scale is ‘subscale’ at this point of time. So in automotive you’ve got to spend extensively to create the network, getting your service network, etc., putting everything in place. When you get the volumes, you become a profitable company. For us, in the next one and a half or two years, it’s not that far off at net level as well. Right now, we’re at the gross level. And like I said, we don’t sell any vehicles at a loss at all.

How did the company perform in the last fiscal? What are your future plans?
We want to aggressively expand our footprint in the electric vehicle segment and FY21 has been one of our best years in terms of performance despite the pandemic. We have recorded a growth of over 15 per cent, ending the year at 53,500 Hero EVs on the road. We are extremely bullish about our sales volume and aim to double our growth to more than 1 lakh units in the 2021-22 fiscal. We have earmarked around Rs 700 crore for expansion, modernisation of production facility, and strengthening the supply chain over the next 3-4 years. We have an aggressive mindset to expand our footprint. At Hero Electric, we have an ambitious sales target of minimum 5-7 lakh EVs by 2025.