EV lobby asks for contingency support from govt

EV lobby SMEV (Society of Manufacturers of Electric Vehicles) has reached out to commerce and industry minister Piyush Goyal, seeking support for the EV industry facing embargo on utilisation of FAME subsidy through the official National Automotive Board (NAB) portal pending resolution of ₹1,200 crore worth of outstanding subsidy owed by the Ministry of Heavy Industries.

In the letter to the minister, SMEV said that unpaid dues of ₹1,200 crore since the last fiscal to affected original equipment manufacturers (OEMs), a further embargo on these companies to list sales on the official NAB portal, and further notices to recover past paid subsidies have created a crisis for the industry.

"These are home-grown companies, fuelled by the zeal of 'Make in India', 'Start-Up India' and financed by Indian money and enterprises. It will be to nobody's credit if these EV companies fail or are sold for a song to the highest bidder. It will be a black mark against Indian enterprise and the burgeoning E-Mobility plans of the Government. It is important to note that investors across the world are watching this space closely, and banks and financiers are refusing to extend credit," says Sohinder Gill, director general, SMEV.

SMEV called the situation "a triple whammy", unprecedented in the annals of business in the country and anywhere else across the globe against the very companies that pioneered the EV revolution in the country, especially from the time when there was no government support to the sector at all.

The industry body in its communication has said the unreasonable situation, coupled with a cavalier attitude towards the financial condition of OEMs has prompted it to seek the commerce and industry minister's support as he might understand the business cycle, the production and process of industrial units, the financial cycle and what impact it has on business when the cycle stops.

Vendor payments across the EV ecosystem have been inordinately delayed, SMEV points out. "Employees across all these companies are insecure and salaries are being deferred or delayed. Dealerships are collapsing," the EV lobby says, seeking the minister's intervention and a meeting to discuss how these companies could tide over this crisis.

Earlier this month, SMEV wrote to the finance ministry proposing the creation of a ₹3,000 crore rehabilitation fund to revive and sustain operations of original equipment manufacturers (OEMs), which have been badly affected by the recent FAME (Faster Adoption of Manufacturing of Electric Vehicles) "subsidy blocks".

"The cumulative effect of the subsidy blockade, the claim on older subsidies, and the refusal to allow future sales have been devastating on start-ups and first movers in the EV 2W segment. Many of these companies will not be able to come out of the financial stress caused by these actions," said Gill.

Rahul Mishra, partner at global management consulting firm Kearney, believes the reduction in subsidy will have a short-term impact on price competitiveness of some EV brands and may impact sales but in the long term it will push the industry to drive greater cost competitiveness through better products, lower costs and leaner operations.

"Few years back when subsidy for non Lithium vehicles was withdrawn, the sales had drastically shrunk but soon the market pivoted towards better, energy-efficient EVs," Mishra says, adding that the industry also needs to consider that subsidies are temporary and their long-term strategy and competitiveness need to be resilient to such changes.