The electric vehicle (EV) sector in India expects high growth in the coming years. EV companies believe that demand will surge with electric two-wheelers (E-2W) and three-wheelers (E-3W) driving the sector’s growth.

Last year, despite the Covid-19 pandemic, many EV companies raised funding significant enough to shape India’s future electric mobility landscape.

Last month, electric scooter manufacturer Hero Electric raised ₹2.2 billion (~$29.5 million) as the first part of a Series B funding.

Mercom spoke to Naveen Munjal, Managing Director, Hero Electric, to discuss the company’s plans and targets and his perspective on the EV industry and existing policies.

1. How is the EV sector doing in the country now?

The EV industry has grown tremendously in the past year as the industry saw 94.16% growth in EV demand. Increasing traction and restructuring of EV policies helped drive more attention towards the segment. We aim to achieve sales of 300,000 vehicles in the coming year. The demand for EVs is expected to see a massive increase by 2030.

2. How far can the ₹2.2 billion raised in the Series B funding take the company, and what will it take in terms of investments for you to truly scale electric two-wheelers in the country?

 The EV saw some great progress in the year 2021. Our goal is to amplify our manufacturing capacity to 300,000/year, build both offline and online distribution, and invest in research and development for our next-generation vehicles. We are also targeting 1 million units for the coming years.  

3. Could you talk about Hero Electric’s business model and strategy to target consumers? How expensive are electric two-wheelers compared to petrol-based two-wheelers?

Given the number and type of products we have across various segments, our target audience is wide. From a college-goer and a performance enthusiast to an eco-conscious customer or even a senior citizen, our approach to developing the products was done keeping family users in mind.

Business-to-business (B2B) sales are crucial for the company, and we are looking to garner 35% of our sales from this segment in the next four years. The segment currently contributes 9% to our total sales; we have products to cater to corporate mobility needs. We expect state governments to encourage the B2B sector to adopt electric vehicles. The last-mile delivery sector has huge potential to drive mass adoption and create demand for the sector.

The pricing of EVs post the recent FAME revisions in July are on a par with ICE vehicles and even lower than ₹60,000 (~$808.99) at Hero Electric. The recent policy changes have significantly brought down prices. This is a great move to encourage adoption and transformation to EVs, push up demand, and create awareness for the segment.

4. How do you see the electric two-wheeler segment’s growth in India over the next five years?

Electric two-wheelers (E-2W) are expected to grow and make up 77% of the EV segment. The E-2W market should grow with at least an 84% compound annual growth rate in the next five years.

Currently, the EV sector constitutes less than 1% of the total vehicle sales in the country. We expect the electric two-wheelers market to be 10-20% of the ICE market in the next five years. Over the past four years, sales figures have grown exponentially, considering the overall market size from 40,000 units in 2017 to 170,000 units closing this fiscal year. Even at the minimum base conversion of 10%, the market will expand to 2 million units per annum. With a little push and more favorable policies, this number could expand to 20%; around 4 million units will be sold yearly. For the upcoming fiscal, we are aiming to double our growth as the outlook for the industry looks positive.

5. Does Hero Electric plan to expand its charging infrastructure in the next five years? Is the current charging infrastructure adequate to meet the demand?

 Yes, we aim to extend support in building an ecosystem with an easily available charging infrastructure. We have already contributed to this cause by setting up over 1650 charging stations across the country, even as the Union government has been pushing towards E-mobility and has also approved a production-linked incentive of ₹181 billion (~$2.43 billion). This provides many benefits like lowering the cost of batteries and creating employment opportunities. The next five years are crucial for developing better infrastructure for EVs in the country.

6. What is your take on the current government policies towards the EV segment? What more needs to be done?

The government policies are expected to bring the change EV segment needed in a long time. The Union and state governments have paved the way for EV development in the vehicle space.

The EV sector recently saw a much-needed recovery with the Faster Adoption and Manufacturing of Electric Vehicles in India Phase-II (FAME II) subsidy increase and the implementation of the EVE policy in Gujarat. The revised framework is relevant for manufacturing companies as it will accelerate demand creation for E-2Ws, E-3Ws, and e-buses. It will eventually decrease the parity between the traditional ICE (engines) and the EVs.

Gujarat’s revised EV policy following the recent amendments of the FAME-II program is an excellent move that will further bridge the gap and make the switch to electric vehicles an attractive option. With this policy, the prices of Hero’s EVs will further come down, making them the most affordable in Gujarat compared to pricing across the country. Further, allocating funds and capital to set up additional charging stations will help build the much-needed charging infrastructure and address the consumer’s range anxiety. As we at Hero Electric continue to expand our reach, set up charging points, and reskill private garage owners to create an Ecosystem for EVs, additional subsidies from state governments through policies will help grow EVs and transform the sector into a cleaner and greener mode of transportation.