'Passed subsidy cost to customers', says Naveen Munjal of Hero Electric

Homegrown electric vehicle (EV) manufacturer Hero Electric’s managing director Naveen Munjal said that the company has passed some subsidy cost to customers, claiming that subsidy suspension has had a negative EBITDA impact.

Several OEMs, like Ola Electric, Ather Energy, TVS Motors and Hero MotoCorp — are being investigated for potential breaches of the local-sourcing regulations of a government scheme that have had their subsidies halted in September 2022.

Munjal, in an interview with CNBC-TV18, said the subsidy suspension issue should get resolved soon. He added, “This is a matter of interpretation of localisation norms, and what you had to localise at what period of time and whether the supply chains existed that time or not, and whether what happened with COVID, etc. So this is, I believe, a matter which will get resolved. This is not going to go on for too long.”

Due to the suspension of subsidy, these OEMs are encountering significant challenges as the government has ceased the distribution of Faster Adoption and Manufacturing of Electric Vehicles (FAME)” subsidies that were allocated for EV manufacturers.

“This does have an impact on the working capital of any of these companies, including us. So of course, there is an impact, but at the same time, this is something which we are putting aside,” Munjal added.

Munjal also said, “There is a cost which we are passing on to the customers and there is a cost that we are bearing as a company itself. Now we have got a product range, which caters which goes from about Rs 80,000-85,000 and now upwards to about Rs 1,30,000… So we have got a very, very wide range. Like I said, we have got five platforms and multiple variants on top of all of that. And the business is designed in such a way that should there be no subsidies or any incentives going forward, the business will be robust by itself.”

While talking about the company’s recently launched next generation of e-scooters, the MD said, “These new products which are designed in a way that our business model becomes subsidy agnostic. So the business plan does not rely on subsidies for the long run. So while subsidies are there, they help in the growth, etc. But in the long run, should they not be there, then your business has to be able to stand on its own feet. So that's the way that we have built our business.”

Hero Electric has launched three new e-scooters - Optima CX 2.0, CX 5.0 and the NYX e-scooters for 2023. “Now, in this case, we are putting that aside, we hope this matter will get resolved over the short term rather than the longer term and we will go on from there. So these new products, which we are launching today, these three new products are not really taking subsidy in the same element as it as they were earlier into account. So should it come, it's going to add on, but should it not be there, we have a robust business plan already in place.”

He further said: “This is unprecedented growth that we are seeing. So the policy itself was a good one. Now it's a matter of interpretation and we have gone by all norms of the government and passing the amounts on to the customers. So this was about demand creation and we have done that all along. So we have never shied away from that. So there is absolutely no wrongdoing of any kind at all.”