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Hero Electric looks at fivefold expansion in output capacity

July 16
10:56 2019

Hero Electric, one of the largest electric scooter manufacturers in India by sales, plans to expand its capacity from 100,000 units per annum at present to 500,000 units as the demand for electric two-wheelers is expected to rise significantly in the coming years.

The company will also invest in increasing localization of components and establish an ecosystem for manufacturing its e-scooters, enthused by the push towards electric mobility by the Union government.

The Naveen Munjal-led company will continue to invest Rs 40 crore to Rs 60 crore every year in the next few years for expansion of capacity and research and development of products. The company is also in the process of increasing the number of dealerships and sub-dealerships from 600 at present to 1,000 by next year.

The company is bullish about the future of electric scooters and expects a significant increase in demand in the coming years, said Munjal.

Hero is evaluating an investment in the battery pack assembling set-up in India in its quest to localize the components but nothing has been finalized as yet.

“We are very confident about the increased demand this segment will witness. As a result, we are investing in expanding the manufacturing capacity and will be ready to tackle the increased demand. We are satisfied with the announcements made by the government in the budget for promoting electric vehicles,” Munjal said in an interview.

Sales of electric scooters declined as the Union government introduced tight localization norms to avail benefits under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME-2) scheme.

Hero Electric, which was expected to break even in FY19, is now expected to turn profitable in FY21.

If the Union government goes ahead and bans two-wheelers that run on internal combustion engines, manufacturers such as Hero Electric will stand to gain. Also, the exemption of customs duty on import of critical parts such as lithium-ion cells for original equipment manufacturers, vendors will boost the future plans of such eco-friendly vehicle manufacturers.

Hero Electric in December 2018, raised Rs 160 crore from Mumbai-based Alpha Capital to build its second factory, develop new products and expand dealer network on hopes that local demand for its eco-friendly products will nearly double in the next few years.

To promote development and manufacturing of electric vehicles in India, finance minister Nirmala Sitharamanannounced income tax rebates of up to Rs 1.5 lakh to customers on interest paid on loans to buy electric vehicles, with a total exemption benefit of  Rs 2.5 lakh over the entire loan period.

The minister also announced customs duty exemption on lithium–ion cells, which will help lower the cost of lithium-ion batteries in India as they are not produced locally.

Makers of components such as solar electric charging infrastructure and lithium storage batteries and other components will be offered investment-linked income tax exemptions under Section 35 AD of the Income Tax Act, and other indirect tax benefits.

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