Can the policy push to EVs give a booster shot to pandemic-hit bus makers?

The high acquisition cost may still be a dampener for the financially beleaguered STUs

Pandemic-battered bus makers are hoping to get a booster dose from the EV policy announced by various state governments. The incentives and tax exemptions will prompt the state transport undertakings (STUs) and municipal corporations to float new tenders to procure e-buses, driving the demand for electric buses. This in turn will encourage bus manufacturers to scale up their plans.

Prima-facie, all seems hunky-dory, but a high acquisition cost may still be a dampener for the financially beleaguered STUs. Therefore, unless a viable business based on a public private partnership model emerges, the adoption to e-buses, despite all the sweeteners, may not happen at an accelerated pace.

In the last one month, three of India’s largest states, including Rajasthan, Maharashtra and Gujarat have announced their EV policies and as many as 20 other states are expected to do so in the coming months. This in line with the government’s objective to cut emissions and reduce the import bill on fossil fuel. All the incentives are in addition to the government’s FAME-II scheme.

A strong preference for personal transportation, restricted movement and shuttered schools, colleges and offices bruised bus sales dragging them to the lowest in 9 years. Bus manufacturers dispatched a total of 25,485 units in FY21, according to Society of Indian Automobile Manufacturers (see chart). The recent policy push gives some hope amid the gloom and doom facing the segment.  

Rohit Srivastava, vice president, Product Line – Buses, at truck and bus market leader, Tata Motors said the policies from state governments focus on incentivising electric vehicle purchases, making them more attractive for STUs.  The policies will provide an impetus to the entire ecosystem, and stakeholders across the system will be benefitted.

"The resulting vehicle requirement will encourage OEMs to scale up EV plans. STUs / municipal corporations of major cities in states where the EV policy has been announced will benefit from the subsidy / incentives / tax exemptions, under the policy and will float new tenders for e-bus procurement, driving demand for electric vehicles. Also, new e-buses to ply on major highway corridors will add to the demand," said Srivastava.

Nishant Aryan, vice chairman and managing director, JBM Auto, believes the current state of the bus market is “a blessing in disguise”. “For a company like us that is focused on low emission technologies like CNG and electric there has been no slowdown. As a matter of fact we have been growing,” he said.

The kind of support that EVs are getting from the central and state governments, internal combustion engine (ICE)  buses stand nowhere. “It therefore makes sense for us as a company to put our resources in EV buses where there are no permits, road tax or registration and the savings for the operators are huge,” said Arya. He is confident that the slew of exemptions and incentives will propel the e-bus market from the current 5500 units per annum market to 40,000 to 50,000 by 2026-27.

But not everyone is as excited. “There are still a lot of unknowns and the business models are still evolving,” said Vinod Aggarwal, MD and CEO at Volvo Eicher Commercial Vehicles. “For all the savings which e-buses offer, their upfront cost is very high compared to regular ICE models,” he said.

There is scope for a third party to come in, own and maintain the buses and let the STUs run them, he said. “While the scheme and the state-led incentives do offer an opportunity, it is premature to gauge the impact it will have on adoption,” he said.

While VECV is getting a 12 meter e-bus ready and is keen to participate in the bids as and when they are invited,  the company will go ahead only if the commercial agreements are to its satisfaction, said Aggarwal.

Maharashtra is targeting electrification of 25 per cent of all public transport and last-mile delivery solutions over the next four years in Greater Mumbai, Pune, Nagpur, Nashik and Aurangabad. Close to 15 per cent of all Maharashtra State Road Transport Corporation (MSRTC) buses will be electrified by 2025. The government is also offering incentives of up to Rs 30,000 for e-three-wheelers (Rs 75,000 in 2021) and Rs 20 lakh for electric buses. EVs sold without a battery will only be eligible for 50 per cent of the proposed incentives.

Tata Motors’ frontline sales teams, along with its development centre and factories at Pune and Dharwad, are proactively engaging with the concerned authorities and STUs of towns shortlisted by the government for this initiative, said Srivastava, referring to Maharashtra government’s EV policy.  The company has already won the largest gross cost contract for 340 e-buses from BEST in Maharashtra, he said.

A spokesperson at Ashok Leyland, the second largest commercial vehicle maker by sales, declined to comment on the story. The Hinduja Group flagship, which recently carved a dedicated business unit for EVs, is set to make an announcement on their EV plans in the coming days.