The Ministry of Heavy Industries has launched an investigation into the alleged violation of whereabouts standards imposed by the Faster Adoption and Manufacture of Electric and Hybrid Vehicles (FAME) scheme by electric vehicle manufacturers. While several companies have come under scrutiny, the grants for Hero Electric and Okinawa show “expired” status on the FAME website. “The exclusion of the company’s products from FAME eligibility and/or any prolonged delay in receiving grant applications could adversely impact its credit profile,” Care Ratings said of Hero Electric. in a recent report putting the company’s debt ratings on watch with negative implications.
“The FAME subsidy represents 25-30% of the company’s overall price of (electric two-wheelers) and its removal would negatively impact the price competitiveness of its products and/or its profitability,” Care Ratings said. Grants from both companies have been on hiatus for several months now, although the status was only changed to “expired” in September. A further delay in the grants would impact Hero Electric’s already stretched liquidity profile, the rating agency said. ICRA made similar observations about Okinawa Autotech, putting its ratings on watch with negative implications. The development could delay Hero Electric’s fundraising plans, further impacting its cash flow and liquidity profile, Care Ratings said.
Hero Electric is in talks with investors to raise funds for its expansion plans, including the establishment of two more assembly plants.
Hero Electric and Okinawa Autotech informed the rating agencies that they complied with the rules of the FAME regime and that they had completed all the procedural formalities to obtain the resumption of their subsidies.
In response to questions emailed to ET, Jeetender Sharma, general manager of Okinawa Autotech, said the company is following all government guidelines. “We have shared all documentation with testing agencies to their satisfaction,” he said, adding that the company continues to subsidize its dealers and customers. “At Okinawa, we ensure that the highest quality standards are met in all of our products and processes.” ET’s inquiries to Hero Electric did not elicit a response until press time. The FAME program comes with a caveat that manufacturers source key components for their electric vehicles locally, such as motors and controllers, to help create a local ecosystem in India and not not subsidize cheap imports from China with taxpayers’ money.