(MENAFN- Live Mint)

New Delhi: At least half a dozen Indian electric bus makers, including Tata Motors Ltd, JBM Auto Ltd, and PMI Electro Mobility Solutions Ltd, are eyeing the country's largest e-bus tender set to close on 6 November, according to two people aware of the development.

Megha Engineering and Infrastructure Ltd's subsidiary Olectra Greentech Ltd, Pinnacle Mobility Solutions' subsidiary EKA Mobility, and Hinduja Group's Switch Mobility Ltd have also shown interest in participating in the tender, and earnest money deposits are likely to be completed in a few days before the tender closes, said a government official.

The tender floated by state-run Convergence Energy Services Ltd (CESL) seeks to deploy 10,900 e-buses in Delhi, Ahmedabad, Surat, Hyderabad, and Bengaluru under the PM E-Drive scheme. India's electrification of public transportation supports the country's aim to achieve carbon neutrality in the transport sector by 2070. A CareEdge Ratings March report estimates that, led by incentives, e-bus sales are expected to cross 17,000 units by FY27.

However, the latest tender was deferred twice due to high bidding costs, Mint reported on 22 October. Companies have to pay an earnest money deposit of over ₹312 crore to participate in the bidding for all five cities, according to publicly available tender documents.

“There will be no further delays in the tender," said the first official.“These bus manufacturers have shown interest in the tender."

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According to the second official quoted earlier, e-bus makers informed the government that the country's total annual manufacturing capacity is 33,000 e-buses. With existing order books, the deliveries for this tender are expected to be completed in the next 2.5-3 years, the official said.

“The lowest bidder in this tender will form a contract with the state transport agencies. But due to the sheer volume of this tender, the second-lowest bidder may also get a contract for some buses in the financial bids," said the official.

Both officials spoke on the condition of anonymity as the names of the potential bidders are not public.
Queries emailed to the heavy industries ministry, which operates the PM E-Drive scheme, remained unanswered until press time. Tata Motors, JBM Auto, and Olectra Greentech also didn't respond to queries.

EKA Mobility, Switch Mobility and PMI Electro declined to comment.

The bid conditions

“During the pre-bid meetings held as part of the tender process, around 20 interested bidders-including those referred to in the query-took part and showed strong interest. It's encouraging to see such participation. The final outcome, however, will be known only on the day the bids are opened," said CESL in response to emailed queries. The company is a subsidiary of Energy Efficiency Services Ltd (EESL).

“In line with standard tendering procedures, the names of participating firms and particulars of their Earnest Money Deposits (EMD) as specified in the tender will be known only after the opening of the techno-commercial bids on the stipulated date," CESL said.

Citing the finance ministry's Manual of Procurement of Goods guidelines and General Financial Rule 170, the company said,“Amount of bid security should ordinarily range between 2-5% of the estimated value of goods to be purchased."

To keep this value at the lowest level, CESL has kept the earnest money value at 2%, it said, adding that in the previous tenders where EMD was at the same level saw“a wider participation by the bidders".

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Moreover, a bidder is required to submit the earnest money only for the quantity bid for supply, it said, citing examples: for Hyderabad, it is ₹33.2 crore for 1085 buses, while the amount is ₹15.2 crore for 600 buses to be supplied for Surat.

Mumbai, Pune, Kolkata and Chennai are excluded from the current tender. Mint reported on 7 October that the government had started planning a tender for Pune and Mumbai after Maharashtra had completed its eligibility criteria.

Cost incentives

The tender seeks a supply of 10,900 buses under the gross cost contract. The buses will be owned by manufacturers, and state transport agencies will pay them on a per-kilometre basis.

Companies have expressed concerns about the asset-heavy model as they will bear the cost of the e-bus on their balance sheet. Mint reported earlier on 15 October, citing people privy to the matter that Tata Motors has skipped tenders where the company has to own the e-bus, i.e., asset-heavy contract models. The company plans to re-enter select tenders through a consortium model, even as full clarity on asset-light mechanisms is awaited, a Tata Motors spokesperson said at the time.

This tender, which originally opened for bids in June, aims to reduce the operational cost of electric buses. The government has allocated nearly 40% of this scheme's outlay– ₹4,391 crore–towards reducing the upfront cost of 14,028 e-buses in nine cities with a population of more than four million each.

According to the scheme guidelines, incentives for e-buses will be delivered through state transport utilities, as these sops will be provided to cover operational costs. For other electric two-wheelers and three-wheelers, sops are provided directly to manufacturers, reducing upfront capital cost.

Each electric bus costs about ₹1 crore, and according to scheme guidelines, incentives under the PM E-Drive scheme cap the cost of each bus at ₹1.25 crore.

Imports, rare earth hurdles
Batteries in electric vehicles (EVs), commonly lithium-ion ones, account for about 40-50% of the vehicle's cost. These are mostly imported from China, which dominates the global supply of electric vehicles and their spare parts.

The largest tender for e-buses also comes as the global hunt for rare earths and rare earth magnets used in electric vehicle motors heats up. In April this year, China curbed exports of rare earth magnets, triggering global panic as these magnets are used in sectors such as defence, electronics, renewable energy, and automobiles.

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The Indian government relaxed localization norms for electric buses and trucks under the PM E-Drive on 30 September, allowing manufacturers to import rare-earth magnet-laden traction motors, essential to EV manufacturing, without losing out on government incentives.

Mint first reported the development on 13 September.

Mounting backlog

Tata Motors, Olectra, JBM, PMI, and Switch Mobility held about 88% of the elecric bus market share in FY24, the CareEdge Ratings report said.“These companies had an order book of approximately 20,000 electric buses as of September 30, 2024, set to be delivered within the next 1-2 years."

Large order books are causing supply delays. In May this year, the Maharashtra government cancelled a ₹10,000 crore contract with Olectra Greentech for 5,150 buses after the company failed to supply the buses on time. The contract was reinstated after the state government and the company agreed on a staggered supply plan.

Still, supplies are pending as state transport agencies have awarded multiple tenders to every e-bus manufacturer in India, according to a third person aware of these contracts, who also spoke on the condition of anonymity.

For every city, the tender may be awarded in a 50:30:20 ratio, implying that many bus makers will secure some contracts, this person said.

Even the PM E-Drive tender for 10,900 e-buses was also amended to supply buses in staggered“lots", according to publicly available documents. For instance, the 2,000 buses in Hyderabad will be supplied in two lots of 1,085 units and 915 units. New Delhi will have two lots of 1,400 buses each, and Bengaluru will have three lots of 3,500, 600, and 400 units. The other cities will have a single lot.

“With all players having validated products that have clocked many kilometres, the tender of 10,900 buses can be delivered in the stipulated time period," said Ashim Sharma, senior partner and business unit head, Nomura Research Institute Solutions and Consulting.“While it will involve imports of batteries and some other components, the validation of the same has already been done."

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