In a significant setback, three companies—Hero Electric, Benling India, and Okinawa—have been excluded from all-electric vehicle (EV) incentive schemes.

Previously, the Ministry of Heavy Industries penalized these companies for violating FAME-II guidelines by improperly obtaining subsidies.

An investigation into three EV manufacturers—Hero Electric Vehicles Pvt Ltd., Okinawa Autotech Pvt Ltd., and Benling India Energy and Technology Pvt Ltd.—revealed that they breached FAME-II norms, and the Indian government has not taken this lightly.

According to sources, Hero Electric, Okinawa, and Benling India may be de-registered or blacklisted from future government schemes if they fail to repay the subsidies received under the FAME-II scheme.

These companies obtained ₹300 crore in subsidies in violation of FAME-II guidelines, and the government has demanded repayment of this amount.

The Heavy Cost

Sources at the Ministry of Heavy Industries indicate that a new committee, led by the Additional Secretary of MHI, has been investigating these violations for some time and concluded that the companies must pay the penalties for breaching the FAME-II scheme guidelines.

These companies risk being barred from future schemes not only by the Ministry of Heavy Industries but also by other central government schemes. 

In April of last year, MHI fined Hero Electric ₹133.8 crore, Okinawa Autotech ₹116.85 crore, and Benling India ₹48.42 crore for FAME-II guideline violations.

“Three companies—Hero Electric, Okinawa, and Benling—were de-registered. Subsequently, Hero Electric and Benling were barred from all Ministry of Heavy Industries schemes. This didn’t apply to Okinawa at the time due to ongoing court proceedings. The final step is blacklisting from all government schemes, which has not yet occurred because the Ministry of Finance must approve the debarment from all ministries’ schemes and policies,” sources stated.

The Response From The Companies

“The whole matter is under the scrutiny of the Delhi High Court. We would not like to comment on any matter that is sub judice,” said Amit Kumar, Chief Executive Officer of Benling India.

“Since the matter is sub judice, we cannot comment,” stated a spokesperson for Hero Electric.

Jeetender Sharma, Founder and Managing Director of Okinawa Autotech, also declined to comment, citing the ongoing court proceedings.

The Investigation

In 2022, the Ministry of Heavy Industries (MHI) received complaints alleging violations of the FAME-II scheme by several original equipment manufacturers (OEMs). 

These complaints accused the OEMs of selling vehicles that did not meet the scheme’s localization requirements, particularly alleging the import of vehicle parts from China.

MHI investigated 13 companies, finding six in violation of the norms- Hero Electric, Okinawa Autotech, Ampere Vehicles (₹124.91 crore), Benling India, Amo Mobility (₹83 lakh), Lohia Auto (₹11 lakh), and Revolt (₹44.30 crore). These companies were collectively fined ₹469 crore.

Among these six OEMs, Amo Mobility, Greaves Electric Mobility, and Revolt returned the subsidies with interest. 

However, Hero Electric, Okinawa, and Benling did not return the incentives and were subsequently de-registered in October/November 2023. 

The three companies have taken their case to the Delhi High Court, arguing that there was no wrongdoing and denying the subsidy misappropriation allegations.

During the investigation, a Joint Secretary-level officer was assigned in April 2023 to look into the role of officials in the scheme irregularities. 

The Joint Secretary’s report, submitted on December 30, 2023, was later found in February 2024 to be vague, incomplete, and flawed, including failures to properly consider the scheme guidelines and to examine any officials involved.

An official explained that the competent authority did not accept this report. Therefore, on February 20 this year, the Competent Authority assigned the investigation to an independent five-member committee led by an Additional Secretary.

“This new Committee, headed by the Additional Secretary, has been investigating the issue for quite some time. According to the first part of its report, after examining all notifications and guidelines, as well as consulting with the concerned testing agencies and officials of the auto section of MHI, it was effectively concluded that the Scheme Notifications and Guidelines were clear and well understood by all relevant stakeholders, including test agencies, OEMs, and MHI,” he added.

 

The Beginning

The whole episode began in 2022 when the Ministry of Heavy Industries (MHI) received complaints alleging violations of the FAME-II scheme. 

These complaints claimed that various FAME-II registered original equipment manufacturers (OEMs) were selling vehicles that did not meet the scheme’s localization requirements, with allegations of rampant importation of vehicle parts.

Okinawa Files Writ Petition

Meanwhile Okinawa has taken a legal recourse –

“We have filed a writ petition in Delhi High Court to recover our outstanding FAME II dues of upwards ₹425 crore and our case is sub judice. Okinawa Autotech has always been compliant with the scheme guidelines, as observed by MHI’s committee headed by Joint Secretary, Ms. Mukta Shekhar. Okinawa has not availed incentives since the beginning of the last financial year, and we believe the electric two-wheeler industry has reached a stage where it is self-sufficient,” a spokesperson at Okinawa said.

Impact Of Latest Actions On Hero Electric, Benling India, And Okinawa

The recent exclusion of Hero Electric, Benling India, and Okinawa from EV incentive schemes by the Ministry of Heavy Industries (MHI) significantly impacts their future plans in the Indian market. 

Let’s examine what each brand had in the pipeline and how these actions could affect their strategies.

Hero Electric’s Plans

Hero Electric has been a prominent player in the Indian EV market, focusing on expanding its product lineup and market presence. The company had planned to introduce new electric scooters targeting various market segments:

1. Mid-Segment Electric Scooters: These models were designed to offer a balance between price and features, appealing to a broad market.
2. Affordable Electric Scooters: Targeting budget-conscious consumers, these scooters aimed to make electric mobility more accessible.
3. Business-to-Business (B2B) Electric Scooters: Designed for commercial use, these scooters were intended to cater to delivery services and other businesses.

However, the exclusion from government incentives could hamper Hero Electric’s pricing strategy, making it challenging to compete with subsidized competitors. 

The financial strain of repaying the alleged improper subsidies and potential legal costs could further affect their investment in new product development and expansion efforts.

Benling India’s Expansion and Growth Plans

Benling India Energy & Technology Limited, a prominent player in the electric two-wheeler market, has shown remarkable growth and ambitious expansion plans despite industry challenges.

Impressive Sales Growth

In the first three quarters of fiscal 2022, Benling India achieved a stunning 53.73 percent year-on-year growth, with sales reaching around 42,000 units.

Even during the pandemic-impacted period of FY 2020, the company managed to sell 30,000 units.

This resilience led to significant business growth, with revenues increasing to Rs. 96 crores for the first three quarters of FY 2021-22, up from Rs. 45 crores in the same period of FY 2020-21.

The company achieved a sales turnover of Rs. 116 crores in FY 2020-21.

Expanding Market Presence

Benling India has ambitious plans to expand its footprint across India. The company aims to increase its presence in nearly 50 additional cities in the coming months, with a long-term goal of establishing showroom activity in up to 300 cities nationwide.

Setting Up Manufacturing Plants

To support its expansion and meet growing demand, Benling India plans to set up four manufacturing plants in strategic locations across India—north, south, east, and west—starting with Chennai.

Additionally, the company intends to expand its assembling unit in Manesar, Gurgaon, converting it into its first full-fledged manufacturing unit in India.

Establishing India as a Second Base

Benling India aims to establish a significant manufacturing base in India, positioning the country as its second major hub after China.

The company has already invested approximately Rs. 90 crore in building production facilities and developing products.

Over the next few years, Benling India plans to invest an additional Rs. 110 crore to revamp production facilities and increase installed capacity. This expansion is expected to create over 500 jobs in the next three years, contributing to the local economy and workforce development.

Product Line and Retail Presence

Benling India’s product lineup includes both high-speed and low-speed electric scooters -the high-speed model, Aura, and low-speed models, Falcon and Kriti.

Okinawa Autotech’s Growth and Expansion Plans in India

As of May 2023, Okinawa Autotech, the second-largest electric two-wheeler manufacturer in India, outlined comprehensive plans to significantly expand its presence and capabilities in the Indian market. 

Expanding Distribution Network

Okinawa Autotech aims to expand its distribution network substantially. The company plans to increase the number of its sales outlets from 540 to 700 by the end of the fiscal year.

The expansion is intended to enhance its market reach and make its products more accessible to customers across various regions.

Increasing Sales Volume

With an ambitious target, Okinawa aims to sell 1 million units annually by 2025-2026. Achieving this milestone would solidify its position in the market and contribute to the broader adoption of electric vehicles (EVs) in India; however, in the current these plans may be hampered following Indian govt’s action.

Opening New Dealerships

In line with its expansion strategy, Okinawa plans to establish between 1,000 and 1,200 dealerships by 2025. The network expansion is crucial for supporting the increased sales volume and providing better customer service and support across the country.

Significant Investment Plans

Okinawa has committed to investing between ₹800 crore and ₹1,000 crore over the next three years. 

The substantial investment will be directed towards expanding sales operations, enhancing manufacturing capabilities, and supporting new product launches.

Okinawa is set to launch two new products in 2023-2024, including its first electric cruiser motorcycle. 

The expansion of its product portfolio is aimed at catering to diverse customer preferences and tapping into new market segments, further driving the adoption of EVs.

Likewise, to meet the growing demand for its products, Okinawa plans to double its manufacturing capacity.

This will involve increasing the production capacity of its batteries and motors. Additionally, the company plans to open a second manufacturing plant in Bhiwadi, Rajasthan, which will play a crucial role in scaling up production and reducing supply chain bottlenecks.

Okinawa is also exploring avenues for raising funds by divesting a minority stake. The company is said to be in discussions with private equity firms to secure the necessary capital. 

The Last Bit, the exclusion of Hero Electric, Benling India, and Okinawa from government incentive schemes presents significant challenges for these companies, potentially delaying product launches, impacting pricing strategies, and straining financial resources. 

As these companies now face legal battles and financial repercussions, their future plans in the Indian EV market could face substantial hurdles.