The scheme has been allocated a budget of ₹5 billion and is set to replace the FAME-2 scheme, which expires on 31 March 2024. It will operate from April to July 2024, with the possibility of being replaced or extended thereafter.
Understanding EMPS
The primary goal of the EMPS is to foster the adoption of e2Ws and e3Ws, with a secondary objective of gradually reducing the industry’s reliance on subsidies. The government has reduced the maximum subsidy for e2Ws to ₹10,000 per vehicle, down from ₹22,500, and for e3Ws to ₹50,000 from ₹111,505. Additionally, both vehicle categories will benefit from an incentive of ₹5,000 per kilowatt-hour (kWh).
This strategic move has been widely applauded for benefiting both manufacturers and consumers alike.
Mahendra Nath Pandey, minister for heavy industries, had said, “The reduction in subsidy is in response to the heightened demand. Our aim is to strengthen the industry while preparing it for a future without subsidies. The ₹500 crore allocation will support approximately 400,000 e2Ws and e3Ws over four months.”
Notably, the EMPS does not offer incentives for electric four-wheelers (e4Ws) and e-buses, due to the existence of other schemes catering to these vehicles, such as the Auto PLI and PM-eBus Sewa Scheme. Conversely, the EMPS is specifically designed for e2Ws and e3Ws.
The automotive industry had anticipated an extension of the FAME-2 scheme, which includes e4Ws in its coverage. Tata Motors, for instance, had advocated for a three-year extension of FAME-2 for four-wheelers, although no extension was granted this time.
EV market in India
India ranks as the third largest auto market globally, trailing only China and the US. The EV market within the country is experiencing rapid growth. According to the Business Standard, EV sales have surged by more than 45% in 2024, despite subsidy reductions and regulatory changes.
Total EV registrations by the end of 2023 reached approximately 1.5 million units, significantly surpassing the previous year’s figure of just over 1 million. This growth has elevated the overall EV market penetration in India to 6.3%, indicating that the country is nearing a pivotal point in EV adoption.
This shift is further supported by substantial investments from Indian automakers in electrification, driven by the government’s eventual plan to phase out subsidies.
Top 4 EV Stocks in India
#1 Tata Motors
Tata Motors stands out as the leading player in India’s EV market, a position it is expected to maintain in the foreseeable future. The company’s association with EV technology in India is reminiscent of brand names becoming synonymous with certain technologies, such as Xerox with photocopying.
Tata Motors’ global reputation in technology, particularly in EVs, mirrors that of German and Japanese automakers in their respective fields. The company’s ambitious plan to transition predominantly to EVs by 2030 is supported by substantial investments, including the expansion of its Sanand plant in Gujarat for lithium-ion battery production, expected to be operational by 2025.
The Sanand plant is Tata Motors’ largest manufacturing facility in India. It currently produces a wide range of vehicles which includes the Tiago, Nexon, and Altroz.
The Tata Group’s investment in lithium-ion batteries is part of its broader strategy to transition to electric vehicles. The company is also working on developing its own electric vehicle charging infrastructure.
#2 TVS Motor
It’s not an exaggeration to say the EV segment could make or break the case for TVS Motor.
The two-wheeler company has invested heavily in R&D to develop technology, improve its product development, and more. The management has clearly made a bold strategic decision.
TVS Motors has already implemented an EV capex plan of over ₹10 bn. It will spend much more over the next few years developing an EV ecosystem.
It aims to have electric vehicles across segments like delivery, commuter premium, high-performance sports, and electric three-wheelers. The company also aims to launch its range of EV products in foreign markets.
In FY23, the company became the second-largest player in high-speed electric two-wheeler segment only behind Ola Electric.
TVS Motor will dispatch a record volume of more than 200,000 scooters, based on its EV platform, in the current financial year ending 31 March 2024.
The company plans to launch more products in the 5-25kW segment in 2024. It’s also planning to launch an electric three-wheeler.
Starting August 2023, the company has accelerated the production of its existing EV scooter, iQube, by an additional 25,000 units per month. The company has a production target of 100,000 EVs in FY24, up from 50,000 units in FY23.
The company has also unveiled a novel electric two-wheeler called TVS X. It’s designed to appeal to the younger demographic, particularly Generation Z and Millennials. It has committed to a capex of ₹2.5 bn for this effort.
Back in 2021, Hero MotoCorp announced its entry into the EV two-wheeler space.
At that time, it was considered to be a late entrant. The market wasn’t convinced about its strategy.
But that was then. Things have changed now. The market has accepted the slow and steady strategy of the company.
Under its VIDA EV brand, the company has embarked on a clear expansion plan across the country. The FY24 target is to distribute the brand across 100 cities.
Keeping the cost-conscious Indian consumer in mind, the company cut the prices of VIDA V1 Plus and VIDA V1 Pro scooters by around ₹20,000. The management said it would use its existing dealer network to scale up EV sales across the country.
In September 2023, the company announced a further increase in stake in Ather Energy (not to be confused with Aether Industries) with a ₹5.5 billion investment. Prior to this, Hero already owed 33.1% stake in the company.
Ather designs, manufactures, sells, and services electric two-wheelers. Ather also has its own charging infrastructure. It’s also engaged in the EV battery business.
The company has announced plans for an IPO aiming to raise $400 million through the share sale, targeting a valuation of $2 billion.
#4 Bajaj Auto
Another strong contender in the two- and three-wheeler EV space is Bajaj Auto.
A couple of years ago, Bajaj Auto formed a 100% subsidiary, Chetak Technology Ltd (CTL) to tap into the thriving electric vehicle market. This subsidiary develops new EV technologies and products. It will have its own dedicated manufacturing facility.
Their efforts to capitalise on the booming EV industry seems to be working. Bajaj Auto’s domestic sales of its electric scooter Chetak (re-introduced in 2021) grew over four times, from 8,187 units in FY 2022 to 36,260 units, in FY 2023.
While the company did cut the price of the EV bike, this kind of surge in demand was unprecedented.
On the back of this success, the company is now extending its distribution network to over 100 cities and investing in expanding capacity.
It will invest over ₹7.5 billion for FY 2024, a part of which will also be spent on debottlenecking exercises to ramp-up its EV component volumes.
Bajaj Auto is also expected to benefit from improved sales of premium bikes like Triumph Speed 400 and Scrambler 400X.
Happy Investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
