Tata CFO Balaji Advocates Asset-Light Model For E-Bus Procurement

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Tata

Balaji’s comments were made following a question about the Uttar Pradesh State Transport Corporation’s recent announcement of a tender for 5,000 electric buses, which will be procured on a net cost contract (NCC) basis.

Tata Motors Group CFO, P.B. Balaji, advocated for a shift towards an asset-light model in the procurement of electric buses in India. His remarks were made during a media conference call following the company’s earnings announcement. Balaji stressed that Original Equipment Manufacturers (OEMs) should prioritize efficient operation instead of ownership of the vehicles under government tenders. 

The backdrop for Balaji’s comments was a recent tender by the Uttar Pradesh State Transport Corporation to acquire 5,000 electric buses using a net cost contract (NCC) model. This model puts the financial risk on private operators, who are responsible for fare collection and operational expenses. The state aims to introduce 50,000 e-buses over the next four to five years.

Balaji emphasized the importance of an asset-light approach for Original Equipment Manufacturers (OEMs) when undertaking large projects. He highlighted that the cost of each electric bus is around Rs 1 crore, leading to a total investment of Rs 50,000 crore for 50,000 buses. Balaji explained that no OEM has a balance sheet large enough to handle such an investment, suggesting that it would be more appropriate for leasing companies to take on these investments.

He cautioned that owning the buses could place a significant financial strain on OEMs and potentially negatively impact their stock prices. Balaji explained that the expected returns would be compromised, which could put pressure on stock prices, and stressed the need for caution in this matter.

Balaji’s statements underscore the broader discussion on risk distribution in the rollout of electric buses across India. The government is eager to push for faster adoption of e-buses, while OEMs remain cautious about the substantial initial investments and the operational risks of vehicle ownership.

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