Tata Motors' electric truck sales falter after India pulls EV subsidy

EV penetration for the Ace lineup had risen to nearly 10% in the final quarter of FY24, driven by a significant pre-buy as customers anticipated the end of the incentives. It has nearly halved over the past year after the scheme was halted, a senior Tata Motors executive said.

"If I take the entire Ace family, then I would say it has come down to around 4 to 5%. But if you look at the steady state of Q3 of the previous year, the volumes have not dropped by much," Girish Wagh, executive director, Tata Motors, told Mint. He, however, emphasized that the spike in Q4FY24 spike was an anomaly due to pre-buying.

Alos read | Why India’s auto PLI is yet to pick up after two years

Wagh also pointed out the critical importance of reaching an inflection point for sustained growth. "It is evident that unless we reach a particular threshold, a kind of an inflection point after which [the segment will be viable on its own, the continuation of incentives is certainly needed to help."

India's Ministry of Heavy Industries had announced phase 2 of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India, or FAME-2, scheme for five years until March 2024, with a total budgetary support of ₹10,000 crore. FAME 2 was the Centre's EV subsidy scheme, where consumers could buy EVs at subsidized prices and manufacturers could seek the subsidy amount from the government. It was discontinued last year, replaced by PM E-Drive.

Also read | Tata Motors demerger: PB Balaji could unify Tata’s new auto businesses under Tata Sons

PM E-Drive provides subsidy for electric two-wheelers and three-wheelers, along with electric buses, trucks, and ambulances. Electric cars for commercial use were exempted from this scheme–a notable absence, since all previous EV subsidy schemes included electric cars.

The government's decision to exclude the four-wheeler segment, in which the Tata ACE EV also availed benefits, is a matter of “priortization", Wagh explained, as India pivots its EV subsidies towards electrifying buses and heavier trucks.

The Ace EV was an early leader in its segment, appealing to e-commerce firms and municipal applications for its compact size and operational cost advantages.

Tata Motors has begun to benefit from supply-side incentives under the production linked incentive (PLI) scheme for advanced automotive technologies, and benefits will extend to improving costs for its electric buses, small trucks as well as heavy trucks, Wagh said.

Also read | Mahindra closes in on Tata Motors as EV sales falter

“GST as a benefit continues as a demand side-incentive, and now we are also getting supply-side incentives with the PLI scheme. With all this put together, I do see a good possibility of an increase in penetration of electric vehicles in small commercial vehicles right now. In addition to that, when the PM E-Drive incentives get rolled out, that will be an added advantage," Wagh said, emphasizing that the company is in discussions with the government to bring back subsidies for the segment.

Broader CV recovery underway

The broader commercial vehicle (CV) market has faced headwinds last year, with issues such as weak infrastructure spending, high borrowing costs, and sluggish demand from sectors like mining and freight transportation. Capacity utilization rates for commercial vehicles dropped by as much as 15% in Q2 of FY25, reflecting subdued market conditions, Wagh said.

However, he pointed to a gradual recovery in Q3, with utilization rates in certain segments returning to pre-pandemic levels. “We are seeing green shoots of recovery, particularly in buses, where utilization and demand are clearly ahead of last year. Heavy commercial vehicles are also seeing marginal improvements," he said, adding that Q4 performance will be a key barometer for market stability.

Also read | The case for subsidizing electric vehicles

Despite the subsidy setback, Tata Motors during the Bharat Mobility Global Expo unveiled Ace Pro, a more affordable, sub-1-ton iteration aimed at retail customers and small businesses. “The Ace Pro positions us to tap into demand from three-wheeler users looking to upgrade," Wagh said.

Meanwhile, Tata Motors is also ramping up investments in emerging technologies, including hydrogen and LNG-based commercial vehicles. The firm recently launched a 55-ton battery-electric tractor and is participating in the government’s hydrogen pilot project.