Bhel looks to pivot from power sector to transportation, electric vehicles

In an attempt to keep pace with the fast-changing electricity sector, state-run Bharat Heavy Electricals Ltd (Bhel) is positioning itself as a transportation solutions provider, particularly in crowded urban settings.

India’s largest power generation equipment maker wants to become a turn-key metro rail end-to-end solutions provider and also manufacture electric vehicles such as buses, cars, two-wheelers and boats.

While Bhel has signed an agreement with Ashok Leyland Ltd and Tata Motors Ltd for developing a propulsion system for buses, the public sector unit is also seeking technical collaboration to manufacture metro rail locomotives and has initiated separate talks with Hitachi Transportation Systems, Mitsubishi Heavy Industries and Škoda Transportation.

“We expect the permanent magnet motor (for buses) to be ready by March 2017. Post tests we may scale down to cars and two-wheelers and also look at propulsion systems for boats, given the focus on inland waterways,” said a Bhel executive, requesting anonymity.

The National Democratic Alliance government wants to increase the share of waterways transportation from 6% of freight transported in India to 10% by 2020. It also wants to see 6 million electric and hybrid vehicles on the roads by 2020 under the National Electric Mobility Mission Plan 2020 and Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME).

“We have a non-disclosure agreement with BHEL. There are no other business arrangements yet with them, but we are doing some preliminary development work with them to further understand each other. As a leader in EV Buses in India, we are keen to partner companies like BHEL and look forward to more such opportunities to develop and stabilise the xEV supply chain in India,” an Ashok Leyland spokesperson said in response to a questionnaire. xEV, is project aims to develop components for two different power-trains, hybrid and pure electric.

A Tata Motors spokesperson did not respond to an email seeking comments sent on Wednesday night.

A person aware of Tata Motors plans said that “a lot of focus will be in the electric buses segment”, which is expected to get a big push from the government’s urbanisation programme that plans to build smarter and greener cities.

“A lot of focus will obviously be on bringing down the costs,” the person said.

Bhel plans to piggyback on India’s urban challenge, with 600 million Indians expected to live in cities and towns by 2030. This will create a transportation challenge with metro rail being considered as a viable option. Prime Minister Narendra Modi has spoken of plans to get metro rail in 50 cities. At present, 316km of metro rail service is under operation and 500km under construction across 11 cities.

“We don’t want to be dependent on the Indian Railways for orders. The idea is to cater to the entire ecosystem of the metro rail business on the lines of what we did for the power business. This may include manufacturing metro coaches, engines and also constructing the actual metro rail links. This also covers the entire gamut of construction and involves works such as tunneling which will involve tunnel boring machines,” said the Bhel executive.

This comes in the backdrop of an uncertain outlook for the power sector, with India’s current installed capacity of 310,005 MW and projects under construction expected to meet the country’s electricity demand till 2026. This leaves Bhel with little choice.

“The need of the hour is to diversify into these segments and concentrate on them,” said a third person who also didn’t wish to be named.

To start with, the state-run firm plans to manufacture metro rail coaches at its Jhansi facility for which a technical collaboration agreement is expected to be inked shortly. The plan is to start with manufacturing around 400 coaches a year resulting in a revenue of around Rs4,000 crore.

“The metro rail sector has the potential to become a Rs40,000 crore annual business over the next three to five years. We are exploring it,” said the Bhel executive cited earlier.

Experts say India presents the right opportunity for Bhel to plan its mobility solutions.

“In several of these areas being explored by Bhel, the Indian market presents a lot of opportunities, a case in point being tunneling which hasn’t been done here at all to the levels required. There is a lot of scope,” said Anwarul Hoda of the Indian Council for Research on International Economic Relations.

Queries emailed to the spokespersons of Bhel, Tata Motors, Škoda Transportation; and posted on the websites of Hitachi Transportation Systems and Mitsubishi Heavy Industries on late Wednesday evening remained unanswered.

With an order book of Rs98,400 crore that has contracted by 10% compared to a year earlier, Bhel’s the order inflow has became a cause of concern. The company’s paltry order inflow of about Rs1,300 crore represents a steep 79% fall from a year ago. The total order inflow for the nine months ended December was about Rs6,500 crore. While the capital goods manufacturer has a manufacturing capacity of 20,000 MW per annum its order inflow has trickled to around 6,000 MW every year.