Sunday, March 03, 2024
Outlook India
Outlook Business

Hero Electric's CEO Sohinder Singh Gill Outlines India's EV Industry's Fate Without FAME II Subsidy Scheme

While the discovery of lithium-ion reserves in India is welcome news, it will take at least three years before it is viable for commercial use. Till then, the electric vehicle sector will need the government’s support in the form of the FAME II subsidy scheme

Hero Electric's CEO Sohinder Singh Gill Outlines India's EV Industry's Fate Without FAME II Subsidy Scheme
Sohinder Singh Gill, Chief Executive Officer, Hero Electric
POSTED ON March 31, 2023 10:50 AM

Eying to achieve its net-zero target by 2070, the Indian government has been giving the country's electric vehicle (EV) sector a strong push for close to a decade. In 2015, it launched the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) subsidy scheme to promote the manufacturing of EVs and followed through with this move in subsequent projects. 

In this year's budget, finance minister (FM) Nirmala Sitharaman announced an exemption on the capital goods and machinery needed to produce lithium-ion batteries for EVs and reduced customs duties for its import from 21 per cent to 13 per cent. However, there is a flip side to this coin.

The government may not extend the FAME II scheme after 2024, which could spring hurdles for EV players in the country. In an interaction with Outlook Start-Up, Sohinder Singh Gill, CEO of Hero Electric, explains why the industry hopes this does not come to a pass.

Edited excerpts: 

What are the key challenges faced by stakeholders in India's EV sector?

Customer acceptance has always been one of the primary challenges for any new business. Buyers always need clarification before buying a new product. 

How can the government lend a helping hand to this growing industry?

Since an emerging industry like EVs is also part of the government's agenda to run an eco-friendly and sustainable driving environment, its support becomes handy. With the help of subsidy schemes, EV players can take the risk of offering vehicles at a discounted price to consumers. They can match the competition with the old fuel-based vehicle players. 

The government and private players need to work together to accelerate the growth of the industry. Additionally, EV companies also need to ensure quality products by focusing on skill-building and service capabilities. 

India's EV charging network is underdeveloped, with unequal distribution across the country. How can EV players overcome this challenge by adding more charging points to increase EV user adoption? 

Charging is a must for cars; if there are no charging stations, cars will not be bought. For electric two-wheelers, it is a desirable need and not a must. 

EV two-wheelers need opportunity charging. If someone forgets to charge their vehicle at home, they might need charging points on the roads. Hence, it is a desirable need for customers and the industry. 

EV players can take a middle point by creating vehicles that can cover certain kilometers after getting charged once. However, creating charging stations needs a huge amount of investment. Hence, the government and private players need to work together. 

Recently $5.9 million of domestic li-ion was discovered. How will this help the Indian EV players relying on imports for this component?

It is excellent news for the country; we never thought India would have this rare element. However, as of now, it is just a piece of news. There are four or five steps between bridging news and reality. 

First is that the substantiality of this discovery is a gross approximation. Second is the method of extraction that triggers pertinent questions. Who will take out the lithium from the mines and how are they going to do that?

Third is purity and utilization. In what form can we use lithium for EVs? 

The first step is great. However, three to four years are needed to develop some usability of the lithium found in Kashmir. Only then will we be able to reduce our dependency on countries like China, Bolivia and Chile. 

Finding lithium and using it for battery manufacturing are two different things. The latter needs time and includes a lot of processes like extraction and refinement. Since it is a capital-intensive process, what kind of policy support is sought from the government?

The government has already taken the first step of cell manufacturing, which suggests that cell manufacturers can buy lithium and other elements like titanium or cobalt to develop lithium cells. It has also provided production-linked incentives (PLIs). These are significant steps. 

Next, the government could allow manufacturers to buy and converge or refine the ores. However, they are reportedly waiting for electric mobility to take off. If it does not take off, then there will be a demand shortage to buy and convert the ores. 

So, there is a chicken and egg situation. These things will automatically happen if we see great growth in the segment. But if we see a stagnation in sales or a flattish curve in the trajectory, then all the people thinking of significant investments will take the backhand. 

One has to see whether the country needs to push ahead so that other things fall in line or wait for it to happen whenever it happens.

How important is the lithium refinement process in terms of producing batteries?  

Lithium refinement is nowhere in sight right now. Also, it is a very lengthy, time-consuming and laborious process, though not a very technology-intensive approach to a certain extent. 

If you bring raw lithium to India, you must buy and manage other side products. However, it is important to find an alternative to lithium in the next five or six years through the research and development facilities we have in the country. 

Lithium is not forever. Through government-induced research and development infrastructure, we need to search for a better alternative that would be cleaner and sustainable. It is better to concentrate on some futuristic energy needs instead on something which may or may not last forever. 

How will the government's decision to discontinue the FAME II subsidy scheme after financial year (FY) 2024 hamper the EV industry's expected 49 per cent CAGR between 2022 and 2030? 

EV is a three-legged race and the industry alone will not make it to this 40 per cent growth rate. They may not even be able to make it 20 per cent CAGR. If it is the country's agenda and the administration's, then the government must ensure this happens. 

And how can the government do that?

The first and foremost thing to consider is the direct incentives currently given. If this is suddenly removed then instead of 49 per cent growth, we will stand at 4.9 per cent. 

One must remember that these small things should not be overlooked. Otherwise businesses will suffer a setback and pessimism will gain ground. People who have burned their hands will never return to this domain. 

For example, today PLI is considered as an alternative to FAME. However, PLI is only for Rs 10,000 crore companies. What will happen to a smaller start-up working in the domain for the past ten years? Will they shut their business? 

Once the government thinks collectively and creates a singular agenda, other things will flow automatically. The industry will also pitch in, and together, we can create wonders. 

  • Related Articles

    From simplifying recruitment to identifying potential employee issues and spotting talent gaps, start-ups are leveraging HR tech tools to efficiently manage their workforce challenges

    Find, Train, Retain: How Start-Ups Are Banking On HR Tech

    The American bank worked on a model that was favourable for fast-paced start-ups. If the Indian banking sector can emulate that model, while retaining its cautious approach towards lending, it can...

    Why Indian Start-Ups Chose SVB Over Domestic Banks?

    Entrepreneurs can use this alternative financing form to raise upfront capital by leveraging consistently recurrent revenue streams

    How Recurring Revenue Financing Supports Sustainable Business Growth For Start-Ups