2026.09.30 | TB | Auto | Indian EV Bus Supply Chain Expert

Client-led • 12 Aug 2026

Companies: 500570 IN, 532439 IN, ASHOKLEY IN, DAN US, 500228 IN, 505200 IN

Expert Senior Role, Product Development at Tata Motors Ltd

Agenda

• Over five years' experience in the vehicle manufacturing space, with a strong understanding of bus fleet procurement, OEM strategy and transit policy
• Knowledgeable on FAME II and PM E-Drive subsidy frameworks, payment security mechanisms, fund allocation timelines and state-level co-funding models
• Well-placed to analyse working capital requirements and financing structures, noting comparisons between EV players such as Olectra Greentech and OEMs such as Tata Motors
• Well-versed in order book execution, per-kilometre STU (state transport undertaking) tariff pricing, battery lifecycle economics, charging infrastructure constraints and component indigenisation vs import dependence

Questions

00:09:18] We are examining the EV bus industry. Accordingly, we will be focused on EV penetration in the bus segment and how the market is moving in this direction. Could you provide a brief overview of the market?

Expert [00:10:19]: There are around 12-13 players who are presently operating in this market. The major players who are actually fighting and who are very serious players are JBM, Eka, Tata Motors, Olectra, Switch Mobility, Green Earth and so many others, JSW also. Particularly, you will see that in the market, the market is actually flooded with the new players. Traditionally, you will see, generally the OEMs used to actually dictate the market but right now, the situation is changing a lot. Because of the nature of business, most of the buses are being put under the scheme of arrangement of GCC, which has actually opened the door for everyone who thinks that he has got a moat, which can give them a competitive edge over the other players who is applying for that. That's why you're seeing a lot of new entrants, start-ups, which are coming into picture.

Client [00:16:56]: Our objective is to explore investment opportunities in the EV bus sector, which we consider highly attractive as one of the fastest-growing segments within the commercial passenger vehicle category. We are evaluating several companies to gain a better understanding of EVs and the GCC [gross cost contract] model, alongside obtaining insights into the broader industry and its listed players. That is the primary purpose of this call. We can proceed through the 11 sections into which I have divided the call.

00:18:28] We want to understand the current EV bus industry order book size. Beyond the order book itself, there is the matter of actual deliveries. Which OEMs are converting their order books most efficiently, and is this pace sustainable? Furthermore, is it financially healthy for the financing arms to operate at their current turnaround speed? We would appreciate your insights on this.

Expert [00:19:03]: First of all, you see presently the newer cutting-edge companies, capacity-wise, if you talk about Eka capacity, you know they are developing and their stated figure when Pune plant is ready. They are expecting around 4,500-5,000 buses, annual capacity. We talk about JBM. JBM has gone too big, actually too big to sometimes it's very difficult to understand how they had gone so big. They are quoting a total capacity of around 20,000 and they had invested a lot. Actually, they had come up with the plants. Olectra business model is a little bit different. They are not a player, particularly like an OEM player. They are more like an aggregator player. Capacity-wise, the capacity that you see on paper, it is huge.

The problem is that the filling rate, that you clearly asked. Why? In fact, if you see, in the market, if I count it clearly, there will not be around 10,000-12,000 buses and More than 12,000 buses are operating under the GCC. If you add that number, and Tata is the number one player almost two years back. Market share, it doesn't make any sense because these are the tender-based demands and demand filling rate, but the delivery is slow. That delivery is slow because these players, other than the OEMs, if we keep Tata Motors, Ashok Leyland and the Volvo Eicher aside, these players essentially are the bodybuilder players. They had been in the bodybuilding operations. They were traditionally purchasing the chassis from the OEMs. They were converting the bus body on top of that and finally delivering it to customer. They had forayed into the EV bus manufacturing just because they could get the powertrain as well as the chassis component from XYZ player, not necessarily from OEMs.

You take the example of PMI also or the Azad or you take the JBM or the Olectra, everybody is like that. Everybody is procuring the chassis component from China. The main source is China, whoever, whatever, so that, but the entire value chain is ending up in China only. These people are particularly engaged in the bus manufacturing through procuring a chassis component, mostly chassis, doing the body building on top of that and delivering it to the customer. Now the problem with this whole business model is that it is a capital-first business. Someone has to realise the model first, which will provide you a money generation over the 10-12 years period of time. If you ask about 1,000 buses order, so if I typically assume 4x12 buses that is operating in Delhi, it costs you somewhere around INR 1.4-1.5 crore. 1,000 buses, you are infusing actually INR 15,000 crore money upfront only for the bus realisation. You are getting a return in over a period of 12 years and payback period generally you see, it will hover around 7-8 years or something. Most of these people had just accrued the order, but did not have the belly to digest and develop the supply chain, develop the money procurement.

You will see the trend everywhere that these people had applied for the order. They have got the consent process somehow. They have applied for it. Until now, their facilities are not ready yet. This is the problem which is there for the OEM side, especially this bodybuilder side that the supply chains are not that much ready for delivering those orders yet. Second thing, the product point of view. The product itself is very evolving. 2022, we started floating the tenders. At that time, the technology was different. Today, the technology is very different. The evolution is there. Validation is there. Homologation is there. You are developing the vehicle. If you see in the last four years, there are certain norms which are coming into picture, which has to be added. Product development is also happening now simultaneously. Third, this is not the OEM readiness. That is only required for the product point of view. You require infrastructure also, so the infrastructure, the depot readiness. The financial model, particularly, you see the disbursement of subsidy. Basically, INR 1.4 crore bus or INR 1.2 crore bus, if you talk about, the actual amount of subsidy that was available at the first order was around INR 40 lakh per bus. If we talk about today, it comes down to around INR 20 lakh per bus, around INR 10,000 per kilowatt hour they are offering. It is nothing but a discount on the battery.

Client [00:25:21]: Is there currently an INR 20 lakh subsidy per bus?

Expert [00:25:25]: Yes. Basically, they have budgeted around 14,000 buses for INR 4,000 crore subsidy. It comes down to that. It changes from the segment also, for the major segment, mini, midi and maxi. These are three segments of subsidy. On the basis of the product cost, they actually give you the subsidy. Now product-wise, I told you. The development is happening. The facility readiness is happening. The technological changes are happening. The fourth one was, I told you, the subsidy disbursement. The subsidy payout mechanism in the earlier contract was very shabby, I'll tell you, in the FAME II, CESL failed to recognise the pain of the OEMs. There was no concrete mechanism which could have assured that the subsidy will be disbursed on time. Subsidy-wise, CESL was still okay. In the older tender, there were two subsidies. One subsidy was the centre subsidy that was coming under FAME II. There was a state subsidy also where the state has come up with some incentives. For the state subsidy, there was nothing in writing like that. For certain reason, they could stop that. The third thing was there was not anything which is called the payment security mechanism. You are running the buses for two months, three months and you are not realising any money. That was one of the reasons that this delivery was slow. I would say those were the fault at from both the sides. Depots were not ready.

They had not assessed their facility properly. I'll give you one realistic example, like the older booths that they had. They had the shower booths where they used to wash the complete buses. They needed to increase the height of those shower booths because the battery were on top. That they had not considered. The infrastructure they are needed to migrate it, the high-tension line as well as the charging network. Rather, it was a complete understanding between both the players, "Okay, let's go slow," thing. Nobody was in hurry. Why the OEMs were not releasing the buses so eagerly is because the only way you can arm-twist the customer is by not supplying the buses. You see, in DTC or whether you go to Karnataka, or you go to the (inaudible), there is a huge number of CNG fleet, which is about to retire.

Delhi has almost 8,000 buses operating through CNG. These buses are anyway not worthy for operation. They are supposed to be retired. Those buses were procured around 2008 or something. They were due to expire by 2023. That was the only reason the way you could talk about it. One of the glitch was that, who will assure the payment security? That payment security issue, these people had sorted out in the new scheme that is the PM E-Drive, PM E-Drive along with PM e-Sewa. That's why you will see a contrast here. The government had come up with a payment security mechanism, in which the CESL has given the mandate to ensure that the operators are being paid on time.

Client [00:30:09]: We would like to understand the differences between FAME II and the current PM E-Drive scheme that provide improved payment security.

Expert [00:30:11]: In FAME II, everything was lying on the hand of the STUs. Customer STUs are the same. STU has the full ownership that whenever, wherever they want to pay, they will pay. You know the STUs. No one is in profit. Although CESL had a very good mechanism, they had assessed their financial health, they had assessed their demand, they assessed their everything, but these STUs could not generate the revenue properly. You know Kejriwal, for example. Almost 30% of the janata who is travelling on buses is travelling free, in Delhi, all the women. They are not generating enough revenue. When they are not generating enough revenue, how they are supposed to pay to the consortium through the subsidy, through their own pocket, either through the state government or through the central government. From central government point of view, wherever the money was allocated in the budget, that was paid on time under the same. There was no issue related to that.

Client [00:31:38]: Was that INR 40 lakh per bus?

Expert [00:31:41]: That was around INR 40 lakh per bus, yes.

Client [00:31:44]: Is this INR 40 lakh paid as a single lump sum or is it disbursed based on bus usage?

Expert [00:31:55]: Within one year, they are supposed to disburse the complete amount related to bus. Central subsidy, there was no issue at all. Wherever the CESL was involved, there was no issue at all. Wherever the onus was limited to state government, they used to default. There is delay in payment. Until now, we are struggling. They will come up with so many reasons. They will tell you that this was not proper, the bus was not ready, the attendance has not come, so many reasons. For so many reasons, there was issues like that. You cannot win the government. You cannot go to the tribunal case every time for every minute. It goes like that. Anyone you speak to who works with the STUs, they are like that only.

00:33:15] Given a bus cost of INR 1-1.5 crore and a central government subsidy of INR 40 lakh, how much subsidy would the state government provide?

Expert [00:33:29]: State government, I think, INR 0.25 per kilometre and it was around INR 25 [sic] per kilometre. I don't remember the fine prints right now. I'm just giving you a number. See, INR 0.25 per kilometre, so it goes like around INR 5 lakh-6 lakh. Second was that they also provide you electricity on subsidised rate. Registration is free, so many things related. Fitness is free. It depends on what contract you are going into. Contract will change. I'm just telling you the gist, what is the difference between FAME II and the PM E-Drive. PM E-Drive, now CESL has the authority to pay to OEM. Now this time, every STU should open an account with CESL, which will be called the escrow account. This escrow account will have, which we call, a backup capital, which will be from where CESL will debit the invoice raised by the consortium, and they will pay directly. The responsibility of STU is to provide this fill the escrow account within a stipulated period of time, which is nothing but 45 days. 30 days or 45 days money will remain as an advance in your account, for that operation. In case if STU defaults, they don't pay it, CESL will approach to RBI, will take money from RBI and will pay directly to the consortium. RBI will debit that amount from the state government account. Right now, this is basically the PM e-Sewa mechanism that they ensured.

They had laid out around INR 3,800 crore for a payment security mechanism. This was the thing that they had done. They had actually taken out the uncertainty related with the revenue collection. That is why you see, this time, the number of players have increased a lot. Other than that, this time also, CESL has limited the numbers. STU, for example, DTC have 8,000 fleet. They will come out that I want to replace 8,000. What CESL had done is CESL had allocated the quota as per the population. They had a model that they did not disclose somewhere, but they tell us, like it is the number of buses per capita. Depending upon the population of the city, depending upon their payback capability, just like CIBIL score, how they have performed in the past, what is their (inaudible). On this basis, they are allocating it under the PM E-Drive quota. On top of that, if they want to procure anything, they have to procure it directly.

If you see the fine print, so first of all, 2,000 buses that the DTC had requested CESL to include in PM E-Drive, CESL had said no to it. This is a difference. PM E-Drive is much better, although they are offering less subsidy compared to the previous one. These subsidies are in line also because in past, the battery cost was very high and battery cost has corrected a lot. Almost there is a 30% correction in the battery prices, so INR 20 lakh-25 lakh subsidy that they are offering for buses, 4x12 I'm talking about. It is in line with the industry expectation, although industry always expect a lot.

Client [00:37:38]: To confirm our understanding, did PM E-Drive launch in 2024 to support major players through higher subsidies and improved cash flows?

Expert [00:37:48]: Yes. '24 onwards, after PM E-Drive, I think the tender itself was delayed by around one year. There were many questions raised because even that clarity was not there that escrow amount.

00:38:51] Are any new tenders expected to be awarded in the next 6-12 months and are any currently being planned or circulated? Which player is likely to be the most aggressive?

Expert [00:39:08]: This is actually a subjective question, I tell you. First, I will talk to you about the facts. What the PM E-Drive had mandated, there will be around 14,000 buses under this budget allocation that they had done. If there is an extension, and we rather see that will definitely happen because government is very positive towards that, especially how the diesel prices are going up, government will be very keen to offset some of their diesel consumption to electricity. Obviously, we will see that this outlay will improve. As of now, around 12,000 or 11,000 buses are already awarded. I need to just check the numbers. It is there on the internet, you can check it. Around 2,000 buses are pending, which can be still allocated by CESL under the PM E-Drive mechanism. We hope if the capital allocation will increase, more buses will come under this standard. Now this is what we are talking about the CESL only. Other than that, there is a demand which is coming up from the different states. One of that demand is coming from UP. UP government has released a tender of around 5,000 buses around two years back.

Client [00:40:31]: Is that excluded from the GCC model?

Expert [00:40:34]: Everything is under GCC model. That I will give you the clarity right now. I'm not going to any other thing right now. We will talk about the constituents of the GCC model a little later. Let's understand the market well. UP government, UPSRTC is actually looking for procuring of 5,000 buses. They released that tender around 1.5 years back, but the buses that they were looking for, those were not available in the market. They were expecting a range of up to 500km. At that time, no product was available. They have the demand. What they are doing, they are converting their existing intracity fleet into electric vehicle. Kumbh also, they tried to procure around 1,000 electric vehicle buses but last moment, they saw that the infrastructure was not ready, so they transferred these buses to diesel buses.

Other than that, if you see, one more player which is aggressively bidding for EV is the Telangana. Telangana and Andhra are the two states, which are actively looking for commercialising their complete public transport to electric vehicle, again, through GCC contract only, but it will happen under the PM E-Drive scheme or not, it is still not very clear. Bangalore also, around next two years, they are expecting around 2,000 more buses they would like to imbibe into. In next one year, we are looking at least 6,000-10,000 volume will be added in order books. Delivery, fill rate, winning rate, I'm not talking about, but order book.

Client [00:42:33]: Which player would be more aggressive, what are their chances of winning and who might offer the most aggressive pricing?

Expert [00:42:45]: In agggressive players, JBM is already belly up. They have enough volume to deliver. They would not like to add more strength onto their pocket. I am looking for Jindal Group. JSW is almost ready. If I remember right, a few days back, their CEO has showed on LinkedIn that their first bus was rolled out, EV bus was rolled out, indigenously developed. I'm expecting JSW will be a good bidder, very aggressive bidder because if they have the plant ready and if you see, the trend had been like that. If someone is ready with the product that they are bidding it, they just want to deploy it. There are two reasons behind that. First of all, they want to test the vehicle, how they are going to perform. There is no point of parking the vehicle inside the stable. Testing the vehicle and second one is that they want to enter the pie (ph). Earlier, they want to have the advantage of first moving in. I'm counting on the JSW Steel Group. PMI is something which is well-equipped. If you see the delivery-wide rate, PMI has a very good delivery rate. They are very aggressive on that. Eka is someone who is a very realistic player. When I talk about realistic player, they are the pure battery electric vehicle material.

These four players, they will bid aggressively. Green Earth Mobility [sic] is someone who is more interested in smaller pockets. They are targeting the small pockets like Puducherry, they had gone. Bihar, they had gone. They had gone into Uttarakhand also. They are working in Hyderabad also. Pocket-wise, if you talk about, Greencell Mobility is also one of the players who can go aggressively for those smaller tenders. These four players I talked about, Ashok Leyland, Tata Motors, Volvo Eicher, they are still quite busy with the commercial vehicle, their main programme, because still we find that the market is not that lucrative. It is still a very riskier business. We'll talk about the detail in later from the OEM perspective. Let's finish this perspective first.

00:46:06] How do we view the current demand split between intracity and intercity segments? Which segment is growing faster and which markets are specific OEMs focusing on? What is the percentage split between intracity and intercity demand? Assuming a total bus market of 80,000 units, what will the upcoming intercity and intracity order volumes look like for the major players?

Expert [00:46:38]: This is a very interesting question. Actually, intercity is a very big market. As of now, you see, the only constraint is that we do not have the range. Typically, you see the intercity bus operation, we are talking about the delivery of 200km, and 200km is at the 80% charge. When we talk about 200km at 80% charge, then obviously, the range of the buses would be somewhere around 250km. 250km is a cap. Either you have to find an intercity operation where the buses are capable to run only 250km. It is not feasible. That's what I told you, especially the buses linked with the STUs. STU, what happens is generally, buses travel from district to district. If I give you the example of UPSRTC, so their buses go from Lucknow to Agra, for example, which is almost 350km away. Ideally speaking, the range of the buses that is required to cover that operation is somewhere around 350km-400km. Then you drive for 300km, then you stop, you do the charging and you come back. This is the requirement. Frankly speaking, the whole economics of the bus business depends on the number of kilometres. It is a very, very good business.

I tell you intercity is something which had not evolved yet because government is not backing those. CESL is right now not considering it under their PM E-Drive scheme because the demands are not adding up, the products are not ready. Business case-wise, I tell you, intercity is something which generates at least twice to thrice more revenue compared to the intracity. What happens in intracity, your ranges are limited to the route availability. Maximum, I tell you, in DTC, where the buses are running right now, average range is somewhere around 180km-200km. Considering the same thing, when the same buses operate for 400km, the cost will remain the same. The battery pack will remain the same. The utilisation of the asset improves. The whole modelling of the electric vehicle depends on the fact that the running cost of these buses is INR 10 per kilometre, compared to the diesel where it's INR 30 per kilometre. More number of kilometres, your payback period actually come down. I've given you the premise, how it actually works. Now the present situation is like that, nobody is claiming the 350km range. At least no major players are playing, although Eka is saying that they had come up, Tata is also saying they had come up but frankly speaking, mass market product readiness is not there.

Second thing which is linked with this problem is that the fast charger availability. Now I'll tell you, there are certain players, you can search them on the internet also, one of the player is the NaArNi, if I remember right, Green Bus also is there, NueGo bus operator is also there, these buses are actually operating on the fixed routes. You will find these buses operating between the Hyderabad and Bangalore, Delhi and Chandigarh, Delhi and Lucknow. These are the private-operated buses. They had started doing it. Believe me, their business is profitable from the day one, considering that they have the capital to buy the bus. It's a good market. Two things that will drive. Actually, the more unlocking of value of the electric vehicle market will happen where we have the intercity buses. I will tell you, within 1.5 years, 18 months, 24 months, you will see a lot of electric vehicles will be flying between the intercity. The range anxiety, people are working on that. People are reaching a range up to 350km. With the strategic placement of the fast chargers, it can be easily converted. Second thing, which is more important that, when we talk about the intracity buses, we cannot talk about it in silo. We cannot always talk about product and the customer. We have to barge into the lenses of the charging player also.

This revolution will happen by these three entities because right now, you see, on the intracity buses operation and wherever these buses are running, (audio distorts). Every charging is being managed at the depot itself. If you talk about the intercity, the placement will become very important. One more thing that we discussed with the ministry also is if we are seeing the penetration of electric vehicle? If you see, the industry is not moving up. Industry is moving up with a rate of around 5-6%, not more than that, but electric vehicle market share is increasing. When the EV share is increasing, obviously, those numbers who are going to the petrol pumps will drastically come down. If suppose we talk about a 10% market share, 15% market share, this 10-15% vehicles would be who will not be going to the petrol pumps. That's why you see in all the oil marketing companies, they are actively looking for collaboration with the charging partners. Now the charging partners, they have chargers, but they require land to install their chargers, to provide their services. You will see a lot of pacts will happen between the OMC firms as well as the charging players to provide a fast charging capability at the petrol pumps. I have not seen the Mumbai-Pune Highway. Gadkari had mentioned somewhere that in every 100km, you will have one charger.

All this expressway or the mega highways will be coming, they will be equipped with it. This is my view. This is my understanding of the market also that sooner or later, the traction will move toward the intercity operation because intercity is something which has a better payback period, better IRR compared to the intracity operation. Intercity operation will also pave the way for the private entry. Right now, you see 95% market is with the STU only. The customer base is only the STU. This is when the private player will start coming into, like Neeta Volvo is there, BMC [sic] is there. Many big players are there who will come into picture. VML [sic] is there. They are actually seeking for the product. Everything comes down to the range, everything. I hope within the next 18 months, the range problem will be taken away with either through the charging network or with the product also. There are players in the market who are delivering 350km-400km range.

00:54:53] Having established a broad understanding of the EV bus industry, we would like to examine the financing model. Could you explain how working capital and financing structures for pure EV players, such as JBM, Olectra, and PMI, differ from legacy OEMs such as Tata Motors, Ashok Leyland, and Switch Mobility? How are these financial burdens reflected on the balance sheets of the companies and their financing arms?

Expert [00:55:39]: That was the most difficult question (inaudible) thing because I am not from the finance background. I tell you, that is the main reason, whether it is the OEM. First of all, you understand that GCC contracts are being bidded by consortiums. There is a word called operator. Operator is someone, a party, who will be taking the signing authority, who will be running the buses, whose job is to procure the buses, maintain the buses, run the buses and deliver satisfactory customer services to customers. This consortium, generally, you will see there is a mobility arm of every player. For example, Ashok Leyland, they have Switch Mobility. Olectra, they had EveyTrans, Tata, we have Tata Smart Mobility Solutions Ltd. JBM, JBM Mobility. Basically, first of all, OEMs have cleared their balance sheet. There were two reasons behind that because the subsidy could have been claimed only by the operator itself. If the OEMs become the operator, then the asset had remained in the books of the company itself. First of all, that's why everybody has signed off a limited liability company to transfer all the liability to another concern. Why they had kept it engaged with their name, because the money they will get from the market will come in because of the name, Tata Motors.

All the NBFC firms, all the MSME firms, all the private investors, they will go after the name because they also need some guarantee from the big players like Tata is there, Ashok Leyland is there. Switch case is a little bit different because of Switch itself is a very big company in UK. This is the model. First question, I answered it here that all the liability lies with the mobility firm. In our case, it is Smart Mobility Solution, whosoever. Now the financing, how this is happening? Traditional model is that 30% equity is being bought in by the player itself. Next, rest of the equity is being managed, as well as the working capital is managed, through with the players who are willing to put their money into. There are banking firms. HDFC is there, SBI is there, NBFC is there. They are financing working capital. There are firms like Tata Capital, who are actually providing the money for purchasing those buses. You will see the similar trend everywhere. Some people have private infusion of electric vehicle. Like Eka, you see, there is a money from the Pinnacle. Pinnacle Group had stake their money on that. Enam Capital, if I remember right, they are also (inaudible) around INR 300 crore on that.

JBM case, I don't know how they had got the funding from the major institutions. Some World Bank financing they had got. Even the Asian Development Bank has also given some money to them. That is where OEMs are not staking more than the 30% equity. You see the capital structuring also, you can actually confirm it by some financial fellow, these are also the subsidiary of Tata Motors, OEMs. Basically, Tata Motors have had ownership of these companies. They had infused some capital in form of equity, and against those equity as well as the GCC contracts, the loan has been taken from the NBFC firm. This is how this whole thing is being operated. There is a lot of liability shift. For example, everything has come down to per kilometre. Another entity which is involved here is the CPO, charging point operator. Charging point operator are also added into this consortium with the same aspect, like they are again having a contact, they will be servicing the charger, they will be maintaining the charger, and they will be providing you charging facility at some cost. In some cases, cost is INR 7 per kilometre or INR 8 per kilometre or INR 12 per kilometre. They are also infusing their capital. In that way, the site development costs, the charging development costs, it has been shifted to the other players. This is how a big pie is there.

A lot of risk is there for every player. That is why the risk is distributed with multiple entities. OEM is there, because they are financing their mobility funds through equity. Banks are there because they know that this business is a good business, this is going to stay here. They are putting their money into it. Charging operator, they are also putting their money into it because they know if that exists, they need to sustain this business. Fourth is that private players are there. Those who are having the good cash-rich company, they are looking for a cash generation. Everybody is getting some values on to it. For private equity players, you see, it is a good player. I don't know, you just check these numbers, the IRR comes around 27%, 28% somewhere, if I remember right. It is a good revenue generation business. The problem is that when you add all the things together, it doesn't look very rosy. Good opportunity, capital structuring is having, there is still a need of capital. That's why I tell you that we are paying in cash to the suppliers, making a product which we are financing through our own 30% equity, we are delivering it, we are borrowing the money at 10% cost and we are getting everyday payback. This is a strainful business. It is in need of capital. That's why the business is taking very slow.

On top of that, we have to do the capital expenditure also, for everyone. OEMs also had gone for the facility inclusion. That had also put into a lot of capital investment. It is in crores, INR 100-200 crore that people had put into that. Then on top of everything, you need to ensure the supply chain also. In supply chain also, especially the major component we talk about, like the batteries, motors, especially these all are the imported content. If you don't order on time, you won't get the material on time, your product delivery will be delayed. If you order in bulk, if you are not delivering on that, the inventory is hanging on your balance sheet. It's a difficult business to maintain that. Capital is very much requested and that is the main reason, the kind of capital lock-up that is happening here. That is the main reason the market is not getting the traction, especially from the bigger players. Bigger players have nothing to lose, because you see, Ashok Leyland, Tata, Volvo Eicher or BMW, they know that market is not going anywhere.

They have the capability. They have the capacity. They are just waiting and watching what will happen, so they are not going for the 1% market share. For the player like JSW, player like JBM, this is their bread and butter. They have to go aggressively on that. Right now, the main issue is becoming very difficult for the players like JBM because they are getting a lot of threats from the new entrants like JSW. Another guy, one more surprise entry was there, some rag collector group, Antony or something, they had got the order for 150-200 buses. Market is very much open.

01:04:59] Considering current market conditions, which OEM do you consider to be better financed? Olectra uses EveyTrans for financing, whereas JBM relies on JBM Mobility.

Expert [01:05:19]: No, no, no. You need to see, these firms, whether it is an EveyTrans or the JBM Mobility or the Smart Mobility Solutions, these all are the subsidiary of the OEM itself. First of all, don't get confused that these are the players who are bringing the money. This is like keep manufacturing business intact, keep an operator business intact. Their pure play is to running the buses. They had nothing to do with the production of those buses, so that they can attract the equity. Obviously, if you're putting the money in these, small mobility funds have a better risk and reward ratio compared to the OEMs. for example, if you talk about Tata, Tata adds 3,000 more buses out of the 5 lakh commercial vehicle itself every year. It doesn't add any incremental change, hardly 1% change. For a company like Smart Mobility Solution, who were operating around 3,000 buses, now they are operating around 10,000 buses. What are the risk reward/ratio here? Almost you are doubling the business here. That is one of the reasons. Second reason was that these firms, they have better understanding of business. If the OEM want to keep their business intact to the manufacturing only, these people are supposed to run the complete operation.

Idea for these firms is that they can go public. In future, if it comes to that, that they require more money, they have a firm which can be listed also to take the money from the market. If we talk about the capital infusion per se. Basically, one trend is quite common that you had seen, everybody had put some of their money. They had bought 30% of the stake, how they've flown their subsidy. Everybody has the subsidy with the parent company. Other than that, everybody has got some financial backing. If I talk about that, JBM is very strong because they have got the sovereign capital. That capital, although I don't know at what interest rate, what is the scheme of arrangement, whether it is with the World Bank or with the IDB. I don't know what is the case with them. Availability of the money is quite big compared to all the players.

The second one is the Eka. Eka had got the backing from Enam Capital. Around INR 300 crore they had got from Enam Capital, as well as some of the money they have got from the Pinnacle also. One more group, I remember, some Japanese-Indian investment firm, Nippon was there, I don't know. They had also infused some of the capital there. They are also pocket-heavy fellow. Third one is the Olectra. Olectra itself is a very big cash-rich people from Hyderabad. I'm not able to recall the name of these guys. They are actually rolling out their own money into the market. Greencell Mobility also, they had got around USD 37m funding from ADB. These 3-4 players were the actual direct investment we know, and they are better equipped compared to free cash flow-wise. OEMs, we cannot comment because for OEMs, it is still a very peanut of a business.

Client [01:09:09]: Do you have any views on Olectra?

Expert [01:09:12]: Olectra is a private player.

01:09:57] How do we view the future of this financing structure and is it expected to remain stable? You mentioned that newer players, such as JBM, will require continuous capital for financing. Is this approach sustainable going forward, are they securing financiers easily and how long does it take to finance these orders?

Expert [01:10:28]: This question is tough for me because I'm not the finance guy as I told you, because my finance people do actually that magic. This is how I see the business. If I see my 3,000 buses are operating, my payback period is somewhere around five years. What I believe, after five years, the business will become self-sustainable. You will keep on adding the buses, your free cash flow cycle will start, and then the business will become self-sustainable. Your (inaudible), you can start from the one major order. JBM started delivering the buses, around 3,000 buses they delivered last year, 2025. By '28-29, I believe that they will be self-sustainable. Until then, they require money. You are getting my point, because capital is something and revenue is something. Revenue you are generating daily, but you require capital for the capacity improvement, for the ordering, for realisation, etc.

I particularly believe 2-3 years it will be tough. Other than that, there is still money available with the overseas players, a lot with the private equity funds. We are actually seeking for the value unlocking that can happen in the electric vehicle sector. There is a report which was issued by World Bank only that India has a huge potential for the electrification, particularly in buses. There is a lot of interest from the outside player also in the Indian market. As of now, you ask me, it is tough. In the market, the main money lies with the banks.

Banks have the most money, such as SBI or HDFC. Unless or until there is a dictation from the government. No bank has come forth to offer capital. Generally, sometimes the bank also finance the products but thats not happening. We expect that kind of thing will come from the government, particularly seeing the pressure that we are seeing in the oil prices. That is not happening. You can go for private funding. It is like that, just find a perfect match. Tata Motors also got an investment of USD 1bn from a Saudi Arabia player for their EV business which means there is money in the market. The way market is moving forward, the way intercity traction will come, in 3-4 years market will be self-sustainable in EV. The more payment security will come, more private player. Even now the money that is coming in, is through STU. There are too many restrictions in STU. For 2-2.5 years capital generation will be the key for these players, but later on, the business will be self-sustainable if everything goes right. There are other chances, other things like technical challenges other than the financial challenges also because for every supply chain, we are dependent on the China only. They are not supposed to neglect that factor too.

01:15:34] Why is Tata Motors not actively or aggressively participating in recent orders? Is this due to internal strategy regarding the commercial passenger EV segment, an unappealing market environment or the long settlement periods you mentioned earlier?

Expert [01:16:04]: Most of the answers I have given. Since I am representing someone from the market, most of my views are actually what I am assessing in the market. Tata Motors essentially is a vehicle manufacturer. For me, more viable option. First thing is product, no one talks about product right now because all the operations for the product is being carried out by the OMEs. Then there is a player who is running the buses. Third one is the charging point. Most important is selling the product. I am least interested in running the buses. it has never been a big conder. I need to sell my product. I am more than okay if someone who is good in operating the buses on the road can deal with the STU players, can work with all including legal stuff. We see that this kind of market is actually happening.

In future, how the trend will evolve, I'll tell you. We will be packed with 2-3 players. Right now our mobility firm, or any OEM mobility firm, they are bound to do business with them, complete paraphernalia is needed. OEMs we have certain pay grades, we have certain standards, so it becomes a very costly operation. If I have someone who can run the buses, like example of the Greencell Mobility I talked about, Puducherry's small town, and they have taken the order of 50 buses, they are operating and they are profitable, everybody is profitable. One aspect we are looking for is that can we only become the product-oriented company rather than the GCC-based company? Let the GCC contract to be taken by anyone. We would like to sell only chassis. This is one of the things that we are looking for.

Second thing, that capital realisation, revenue realisation had been very poor. There is always a delay two months, three months, four months. I'm least bothered how it is ticking because we have multiple advantages compared to these players. You see, we are more destined towards the mass market rather than the GCC player. Now you see, GCC also have a limitation. If you add up the complete fleet of major STUs, how much it will be? Take a guess. 50,000-60,000, not more than that.

This is an exhaustive market. Out of those 60,000-70,000 buses, let's say, entire India's fleet, it will be somewhere around 1.2 lakh. We're talking about someone who can buy the electric buses. How many they can buy? They can buy around 50,000-60,000, not more than that. Out of those, they have already have the supply because they are already buying the buses. It is not like that they have not bought the buses from the last 5-6 years. Every year, everybody is purchasing the buses. Actual demand is how much? 30,000-35,000, maximum 40,000. Out of those, 20,000-25,000 tenders are passed already. The traction that will come in the market will be through school buses, intercity buses, stop buses, private players and tour operators. This market will be completely a pure product play, pure range play. For that we require product. It will be more prudent for us to be prepared for the product-oriented market, mass market. The benefit we have is we have a nation-wide distribution network, nation-wide service network. None of them have. Today if JBM wants to give a car in some corner, there are no service stations. Montra has started opening dealership in different cities. Montra is very serious in commercial vehicle. You are talking about buses, so I'm not bringing them into, but talking about the JBM, where they have service stations. We have a very good moat available.

The only thing is that the market is not ready yet. This is one thing. I talked about the pure strategy point. Now coming to the second point, the pricing that we are seeing in the market. I don't know how these prices are coming up, because you know everything. As an OEM, I know what are the battery prices. I know what are the magnet prices. We know everything. I know that this kind of pricing is not sustainable at all. It is continuously loss-churning machines.

Client [01:23:17]: How much does the STU [state transport undertaking] pay per kilometre?

Expert [01:23:25]: Per kilometre, it depends on the segment you are referring to. It goes up to INR 50-70 per kilometre.

Client [01:23:40]: The STU pays INR 50-70 per kilometre and the OEM receives the subsidy on top of that, correct?

Expert [01:23:42]: OEMs, when they quote they have to quote everything, including subsidies and PLIs. You have to include lithium price index.

Client [01:24:09]: How do you quote the price? For instance, for a bus costing approximately INR 1.5 crore, how do you negotiate with the STU and how is the contract structured?

Expert [01:24:12]: CSA has base prices reserved. So they have certain analysis with them. They will tell you the guided rates are somewhere around INR 45-65, they give you a range for the base rate. First thing is most important is electricity cost. So you know what the how many kilowatt the battery is and how many kilometre it can travel. You'll find out your per kilometre cost by calculating how much power the battery is using per kilometre. That will be your per kilometre cost. That is your recurring expenditure. On top of that, you'll build your charging cost or energy cost. The CPO, charging point operator, will give us the pricing according to per kilometre.

Client [01:24:25]: What is the difference between battery cost and energy cost?

Expert [01:24:26]: For example, the battery in the car, assume its about 100 kilowatt, and it's moving until 100km. Just a hypothetical example. For 1km the car is utilising one kilowatt battery. Now go to the second thing, we have to charge the battery so we'll need to install a charger too. To charge all the buses it will be about 4,000 kilowatt for that you need take the energy from the grid. We report the efficiency of the charger and on the basis of that CPO does the coordination with grid, infrastructure development, maintenance of that charger. You have to maintain it. Lastly is the product amortisation cost.

Client [01:26:03]: How do we incorporate the battery lifecycle, considering it lasts approximately 6-7 years?

Expert [01:29:15]: Battery has two ways. One is the beaten life. The price is about INR 10 lakh for a 100 kilowatt battery. That battery will function for about six years or 3,000-4,000 cycles. So roughly what we calculate per kilometre basis, is what is the cost for the battery. You can plan for the future by discount buying the battery you'll need in six years or you can add INR 2-3 to the battery cost. You're creating a pool which will be you are generating free cash flow for the battery purchase after 5-6 years. It's INR 3 per kilometre cost for the battery.

Client [01:31:33]: Olectra will transfer the assets to EveyTrans. Out of that INR 1.5 crore, they receive a reduced subsidy, whilst the state provides monthly revenue of INR 60-65 per kilometre. Is this revenue then treated as bill discounting and financed accordingly?

Expert [01:32:08]: Correct.

Client [01:32:10]: ow do the financial records of EveyTrans account for revenue and how does Olectra receive the subsidy and record its revenue?

Expert [01:34:29]: Everyone's modelling is different. Assume your firm, you have to keep both the firm viable. If you unload the whole asset, no one will finance it. What OEM do, is work on the transfer cost. OEM do not get subsisdy. The subsidy goes directly goes to the OEM player. FAME II subsidy or PM E-Drive subsidy, it directly goes to the hands of the player who is operating. It will directly go to their books only and it works as a capital for them.

Client [01:34:38]: When is the cash actually received?

Expert [01:34:39]: Cash cycle is monthly. Every revenue has a log sheet. The conductor certifies the bus operation and on those basis reports are built in the accounts. It goes to their accounts. After that, it goes directly to the account of the operator. One month actually is the roll-over period.

01:34:45] What is the standard operational uptime for these buses and does it vary across OEMs such as JBM, Olectra and Tata Motors?

Expert [01:35:20]: Contract itself requirement is that you have give 95% uptime. All contract clauses are different. They count the number of breakdowns. Suppose I'm running around 2,000 buses in Delhi. I'm permitted for breakdown of, how many buses, 10 buses? 100 buses breakdown is permitted per month. For the office goers who are not going to the office because the bus has not come. The temperature in Delhi was very high and EVs were not working properly. That will be counted as a breakdown as well. If the breakdown happens, they have to send another bus there within an hour. Breakdowns are treated like this. I think you are more interested in knowing how long will it take to clear if a breakdown does happen. Thats a different answer.

Client [01:35:59]: What is the expected turnaround time for clearing payments?

Expert [01:36:02]: Clear time different because it depends on what the problem is. What kind of problem we are getting. If it is HV components related problem, so then we have to call the people. Everyone's rule is to keep 1-2 buses additionally. It will take time to correct it.

01:36:10] Are OEMs currently facing charging infrastructure delays across major states and cities? On their earnings call, Olectra consistently highlighted infrastructure delays in the Maharashtra region. What is the current status? Furthermore, Olectra was involved in two legal matters, one with Tata Motors and another with the Maharashtra government. We would like to understand the details of both, including the Tata Motors dispute related to Switch Mobility bidding.

Expert [01:36:34]: Maharashtra government, you mean to say, Pimpri Chinchwad Mahanagarpalika Ltd. The Maharashtra government was reluctant because they were operating CNG buses. Everybody was dependent on China. They were not getting chassis from China to make the body parts. Ideally it must be delivered in eight months. They started procuring, delivering in December with a lot of penalty clauses, late delivery charges. Ultimately both the parties were not ready.

Client [01:42:28]: What is the order figure for Olectra?

Expert [01:42:36]: I'm not sure.

01:42:37] What is the level of indigenisation across different OEMs, and what degree of dependency remains on China?

Expert [01:42:42]: Every supply chain is ending in China, but there are good improvements. The dependency left on China has, which is mostly towards the raw material. There are players like OEMs. Best placed player is Tata Motors and Ashok Leyland. These two players are so good because they are developing the complete ecosystem here in India. Third best player is Olectra. Olectra is also developing the complete ecosystem in India. Fourth is Eka. Eka is also developing the complete ecosystem. I cannot comment on JBM, I cannot comment on Greencell Mobility because they don't have chassis experience. Eka doesn't either but I know they are thinking about it.

Client [01:49:07]: Does Olectra also lack experience in manufacturing chassis?

Expert [01:49:12]: Olectra doesn't either. OEM by default, they have all the chassis components with them, except battery, traction motor and all the related HV components, high-voltage components. Other than that, OEMs had everything, and they have the complete supply chain. If Wabco is giving me break component then they are also providing break components for EV. Same is true with the substantial line, anything. We have our own axles, we have our own frames, we have our own body shell, everything is ours, batteries as well as motor and all kind of high-voltage components that are needed for making those buses. Everybody imported it because India does not have the technology, so first 100 vehicles, Ashok Leyland, everybody imported it, but there was a clause also. If you want to claim PLI, that is production-linked incentive, for that you must have certain level of localisation factor. From day one, we OEMs are very pretty clear that we need supply chain here. At least even the products that we are procuring from outside, within the span of three years, they must have at least 50% gross value addition in India. This is called GVA, gross value addition, and LVA also, which is local value addition. The independent agencies and 2-3 certified agencies, and Bureau Veritas, they actually track this local value addition, which is actually used for the disbursement of your PLI as well as the FAME II subsidies. It is quite linked with it. We were very clear. We imported components, then we developed the material here. Not entirely indigenously, but we had our supplier base here.

There are 2-3 players in India like Dana is there. Dana is developing the motors. Dana is also present in China. Right now, if you ask, Dana is actually procuring only the child component from China, and they are doing the motor assembly here in India. Similarly, battery pack. We imported all the battery pack from China. It was such a disastrous thing to do because importing battery is difficult. One battery is almost 750kg. Imagine all the batteries coming through the sea route. It was so difficult. Right now, the trend is that now the cells are being imported. They are assembled here in battery packs. For the cell, we are entirely dependent on China. Similarly, for the traction motor, although the complete traction motor is being assembled here in India, but for the permanent magnet, especially the rare earth-based permanent magnet, we are entirely dependent on China. China is the source.

It could be being procured through the route of Taiwan or Korea or Hungary. In the end, last supply chain ends in China only because China has almost 85% control on the electric vehicle products. Initially, for the traditional players, the import was almost 100% for the LV components and HV components. Right now, the kind of import that is happening is only for the child parts like cells, magnets, adhesives. Similarly for HV components there is Amphenol, they make connectors. That localisation has started in India now. Motherson company which was actually going aggressively of electric vehicle component. Right now in India, OEM localisation, OEMs are right now dependent on only the last part of the supply chain. The last part of the supply chain is, what, which could be the raw material. Other than that the established supply chain for the products here, after certain volume is there, then it will be developed by the local players here. So they are essentially making it here. JBM was procuring almost everything from China, every chassis component from China, whether it is motor, batteries. Right now, they have started working on the localisation. They have started making the battery here in India itself. Now they are starting their local content. Their dependency is more in China more than Tata Motors.

Eka is a very good player. Everybody is working towards that number only. If everybody starts procuring things from Dana. Eka is playing good. Ultimately, Tata, Switch Mobility, Eka, and Ashok Leyland, these players, for raw material, they are dependent on China. JBM, for almost all their chassis components, they are dependent on China. If China stops that, all the EV market goes into dustbin. Agratas is working on that, Reliance is working on that, but as of now, nobody has got that much success. China is quite ahead of the market.

01:56:44] We want to understand the PM E-Drive scheme and its allocated budget. How much of this budget has been utilised to date? Is the government planning to increase funding or extend the scheme beyond its 2028 end date and what is the industry expectation?

Expert [01:59:08]: In PM E-Drive, total allocation is INR 10,550 crore. Out of that for buses it was about INR 4,400 crore. The buses that were supposed to be procured were about 14,000 buses. The capital outlay was about INR 4,000 direct subsidy. The direct subsidy was supposed to be dispersed into those 14,000 buses. The subsidy was about INR 35 lakh for a standard bus, medium bus is INR 25 lakh and mini buses are about INR 20 lakh. Out of these 14,000 buses, 10,900 buses have already been ordered. You can do the math. You can also know how many of these seven-metre, nine-meter, 12 metre, you can find the details. There is no point of discussing it here. If I go by the numbers, there is still an outlay of around 3,000 buses, which is remaining, Delhi is already interested in taking 2,000 more buses, but CESL is denying it. Now coming to the second point, about subsidy allocation, seeing by the trend, Niti Aayog had projected a number of 38,000 EV buses requirement by 2026. Until now, the allocated number, considering the FAME II and E-Drive, if that number goes up, then it will be finished in six months. If I add this complete 14,000 and last year's 8,000, there is still about 15,000 bus target that has not been filled up by the government. The prevailing condition compared to the oil prices and all, we expect outlay to increase. Why nobody is talking about that? CESL takes about maybe 12 months to assist the real demand, realistic product availability, etc. You know, government is government.

Client [01:59:59]: When is the budget expected to be fully exhausted?

Expert [02:00:00]: This budget has not been exhausted. I expect next February as an ideal time. In FAME II they allocated INR 10,000 crore, which was not exhausted. So they have leeway.

Client [02:00:01]: Is there an INR 10,000 crore budget allocated for 8,000 buses?

Expert [02:00:02]: Something. Bus number I know but the additional tender for 6,000 more vehicles, no one had applied for that. That's why they came up with the PM E-Drive scheme first, then they came up with the PM e-Sewa. In PM e-Sewa, they kept INR 3,500 crore subsidy for the payment security. It is just for the payment security.

Client [02:00:11]: Will the actual fund utilisation be INR 3,500 crore?

Expert [02:00:13]: That is, if someone goes into default or something. This was much better approach.