Greaves Cotton Ltd, an engine maker in India, is experiencing significant revenue growth driven by its electric mobility division, which includes the Ampere brand of electric two-wheelers. In the fiscal year 2022-23 (FY23), the electric mobility division contributed 42% to the company’s revenue, surpassing its core internal combustion engine business. The division’s contribution increased further in the March quarter, reaching over 46% of the company’s revenue. To maintain profitable growth, Greaves Cotton is diversifying its business by expanding its traditional internal combustion (IC) components and non-automotive businesses.
Greaves Electric Mobility (GEM), which owns the Ampere brand, played a key role in the company’s revenue growth, with its revenue contribution reaching its highest ever. Additionally, Greaves Cotton is expanding its auto businesses through a 60% acquisition of Excel Control Linkages, an Original Equipment Manufacturer (OEM) specializing in push-pull cables, motion sensors, and controls. The company has also partnered with UK firm Eta Green Power to manufacture electric powertrain solutions, such as battery packs, electric motors, and battery management systems (BMS).
While the newer businesses, particularly electric mobility, are expected to grow faster at the top-line level, there may be bottom-line pressures due to the investment phase of the e-mobility industry. Greaves Cotton acknowledges that the traditional IC engine business is evolving and transforming, and will continue to grow, albeit at a slower rate. The company aims for sustainable profitability in the medium to long term, anticipating growth in both the top line and bottom line.
Despite the success of its Ampere brand, Greaves Cotton is facing allegations of violating localization norms under the government’s FAME-II scheme for electric vehicle (EV) incentives. The government has sent a notice to recover subsidies amounting to ₹127 crore, while around ₹300 crore remains pending.
Greaves Cotton is also focusing on high-margin components, with the acquisition of Excel Control Linkages expected to improve group margins. The company’s strategy to increase the share of e-mobility and new initiatives aims to drive long-term growth and transform and de-risk its business. Consolidation of manufacturing operations into Megasites is expected to bring operational efficiencies and reduced fixed costs in the long run.
The company believes that subsidies for electric vehicles should continue until EV penetration reaches a double-digit figure in the automobile market. They consider the current market penetration of 5% for electric two-wheelers in India as nascent, and subsidies act as a catalyst to boost customer confidence and offset the higher upfront cost of batteries compared to internal combustion engines. However, they recognize that long-term subsidies are not a sustainable solution for the country.
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