Introduction: The Competition Commission of India (CCI) has recently received a complaint under Section 19(1) (a) of the Competition Act, 2002 against Ola Electric Ltd. and other major players in the Electric Two Wheeler (ETW) market. The Informant alleges a violation of Section 4 of the Act, accusing these companies of exploiting the Faster Adoption and Manufacturing of Electric & Hybrid Vehicles Policy (FAME) for their advantage.
Background: The FAME policy was initiated in 2015 by the Ministry of Heavy Industries and Public Enterprises to promote the adoption of electric and hybrid vehicles in India. The Informant claims that Ola, VIDA Hero Moto Corp, TVS Motors, and Ather Energy have manipulated the policy by selling essential components separately, enabling them to remain within the government-mandated limit of INR 1.5 Lac ex-factory prices for 2-wheelers.
Allegations: The Informant contends that the accused companies have consistently breached the INR 1.5 Lac threshold by selling integral equipment such as chargers and proprietary software outside this limit. This alleged pricing strategy has allowed them to secure prices ranging from INR 1.6 to 1.8 lakhs, thereby taking advantage of the FAME policy’s subsidies and depriving genuine manufacturers from accessing the budget allocated for Electric Vehicles (EVs) under the INR 1.5 Lac threshold.
Abuse of Dominance and Adverse Effects on Competition: The Informant asserts that the accused entities are abusing their dominant position in the market, resulting in an adverse effect on competition. The alleged predatory pricing tactics involve presenting the final product within the FAME policy’s price limit, while essential components necessary for the vehicle’s operation are sold separately. This, according to the Informant, denies market access to smaller manufacturers, impacting competition negatively.
Relevant Market Analysis: To analyze the case under Section 4 of the Act, the CCI first delineates the relevant market, considering both product and geographic aspects. The Commission defines the relevant product market as the manufacture and sale of Electric Two Wheelers (ETWs) and the relevant geographic market as India.
Dominance Assessment: The CCI examines the market share of Ola, Vida, TVS Motors, and Ather for Calendar Year 2022. However, it notes that none of the market players, including the accused entities, appears to have a stable market share or position. The Commission observes that various players, both established and new entrants, are present in the ETW market, and the competition is expected to intensify as the market grows.
Conclusion: The Commission finds no prima facie case of contravention of Section 4 of the Act against any of the accused entities. It concludes that none of the OPs holds a dominant position in the relevant market. Therefore, the information is ordered to be closed, and no relief is granted under Section 33 of the Act.
Confidentiality and Directions: The Commission directs the maintenance of confidentiality over the Informant’s identity and documents revealing its identity for a period of three years from the date of the order.
Final Thoughts: The XYZ vs. Ola Electric Limited case sheds light on the complex dynamics of the electric two-wheeler market in India and the challenges in enforcing competition regulations in a rapidly evolving industry. The decision by the CCI highlights the need for a nuanced understanding of market dynamics and the evolving nature of competition in emerging sectors such as electric mobility.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
1. The present information is filed under Section 19(1) (a) of the Competition Act, 2002 (hereinafter, the “Act”) by an individual (hereinafter, the “Informant”), claiming confidentiality over its identity, against Ola Electric Ltd. (“Ola”), VIDA Hero Moto Corp Limited (“VIDA”), TVS Motors (“TVS”) and Ather Energy Private Limited (“Ather”), (hereinafter, together referred to as “OPs”) alleging contravention of provisions of Section 4 of the Act.
2. It is stated in the information that the OPs are engaged in manufacturing and selling of Electric Two Wheelers (ETWs).
3. The Informant has alleged that the OPs are involved in taking undue/ illegal advantage of Faster Adoption and Manufacturing of Electric & Hybrid Vehicles Policy (FAME) launched by the Ministry of Heavy Industries and Public Enterprises, through Department of Heavy Industries (DHI).
4. The Informant has stated that the intent of the Government for the enactment of FAME policy in 2015 was to promote the adoption of electric and hybrid vehicles in India, with the goal of reducing the country’s dependence on fossil fuels, reducing air pollution and mitigating the impact of climate change. Later, FAME I was launched vide notification dated 08.03.2019 for a period of 3 years, commencing from 01.04.2019, for faster adoption of electric mobility and development of its manufacturing eco-system in the country. FAME II was introduced vide notification dated 25.06.2021 and extended till 31.03.2024.
5. As per the information, the policy provides incentives to manufacturers and buyers of electric and hybrid vehicles with the aim to increase demand for these Electric Vehicles (EVs) /Hybrid vehicles by making them more affordable and accessible. The manufacturers stand to benefit through an increase in sales. It is a much-needed initial push to the nascent EV sector, allowing an easier transition for customers from internal combustion Engines (ICE) vehicles to EVs. The policy provided for a demand incentive (subsidy) of Rs 10,000/- per KWh for all vehicles except buses which was subsequently enhanced from Rs. 10,000/- per KWh to Rs. 15,000/- KWh by DHI through a corrigendum dated 11.06.2021. One of the eligibility criterion for availing the demand incentive under the FAME scheme is that the maximum ex-factory price of 2-wheeler is to be INR 1.5 Lac per vehicle. The Informant has asserted that even after the amendment in June 2021 where subsidy limits were reviewed from Rs. 10,000/- per KWh to Rs. 15,000/-KWh, the maximum ex-factory price of 2-wheelers was maintained to the earlier set limit of INR 1.5 Lac.
6. It is alleged that the OPs have been repeatedly abusing the sacrosanct limit set by the government by selling integral equipment such as charger and proprietary software/ upgrades outside the limit of INR 1.5 Lacs, at an additional cost. This deceitful pricing allows them to secure prices ranging from INR 1.6 to 1.8 lakhs, thereby, allowing them to fall within the government-mandated limit of ex-factory prices of INR 1.5 Lac under the FAME policy, which otherwise they would not be eligible for, thus undermining the basic intent of the FAME policy. As a consequence, it deprived genuine manufacturers from availing the benefit of the budget allocated for EVs under the INR 1.5 Lac threshold. By doing so, the entities/ groups have usurped major chunk of the corpus which the Government has allocated as demand incentive under the policy.
7. It is further alleged by the Informant that misuse of the policy in the aforesaid manner by the OPs has resulted in an adverse effect on competition in the relevant market for the market participants and the consumers. Their modus operandi involves a calculated approach to pricing (Predatory Pricing), while the final product is presented within a price limit, essential components necessary for the vehicle’s operation are deliberately unbundled and offered/sold separately at an additional cost. The Informant has stated that these OPs, apart from others, are abusing their dominant position in the relevant market, in violation of various provisions of the Act by indulging in practices resulting in denial of market access, since the small manufacturers would not be able to take the benefit of the FAME policy and as a result find it difficult to establish themselves in this highly competitive market. Consequently, these entities continue to maintain a higher market share as a result of the illegal use of the benefit under the policy, thereby having a negative impact on competition.
8. The Informant has further stated that the aforementioned OPs work in the sector of ETWs and hence the market of electric two-wheeler market can be considered as relevant market as per Section 2(r) of the Act. As per the Information, the market share of Ola, Vida, TVS motors and Ather for Calendar Year (CY) 2022 are 17.57%, 15.75%, 7.51% and 8.32%, respectively. In support of its averments, the Informant has inter alia provided copies of news articles; quotation from dealers of OPs and a table depicting the subsidy availed by some of the entities including OPs.
9. Lastly, the Informant has stated that the Ministry of Heavy Industries (MHI) failed to timely or procedurally instruct these companies to return the subsidies usurped by them on account of under-invoicing and make them liable for misappropriating subsidies from the government and over-charging customers. It is also stated that MHI further allowed these companies to return the excess amount received by them for chargers to the customers while not addressing the under-invoicing done for essential software upgrades which has been further exploited by these companies to their advantage.
10. The Informant has, inter alia, requested the Commission to direct the opposite parties to discontinue abuse of dominant position and to impose penalty on such contravening parties. The Informant has also prayed to the Commission to grant interim relief, if deemed fit and proper, in the circumstances of the instant case.
11. The Informant has requested to keep its identity confidential on account of the Informant being a person of limited means and resources, and having a legitimate concern for its personal safety and well-being. In light of the same, the Informant has requested to maintain confidentiality over the documents filed along with the information e. affidavit and the aadhaar card, throughout the proceedings.
12. The Commission considered the matter in its ordinary meeting held on 20.12.2023 and decided to pass an appropriate order in due course.
13. The Commission has perused the Information, material provided by the Informant as well as publicly available information and observes that the gravamen of allegations of the Informant is under-pricing by the OPs of their ETWs so as to avail the demand incentive/ subsidy provided by the Government under the FAME policy, charging for essential components such as charger, software etc. separately from the customer, and consequently foreclosing the benefit of subsidy to other manufacturers whose products actually fall within the price limit set under the FAME policy. The Informant has alleged abuse of dominant position by the OPs in contravention of provisions of Section 4 of the Act.
14. For an analysis of the case under Section 4 of the Act, the first requirement is to delineate the relevant market as per Section 2(r) of the Act which comprises of relevant product market and relevant geographic market in terms of Section 2 (t) and 2(s) of the Act. The next step is to assess the dominance of OPs in the relevant market so delineated, in terms of the factors enumerated under Section 19(4) of the Act. Once the dominance of an OP is established, the final step is to analyse the allegations pertaining to abuse of dominance in terms of provisions of Section 4 of the Act.
15. Demand side substitutability is a crucial dimension while delineating a relevant product market and includes all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of their characteristics, price and intended use. The perception of consumers with regard to utility and/or interchangeability among products or services is one of the important parameters for defining the relevant product market. The Informant has stated the relevant market to be market for ETWs. In this regard, it is noted that in terms of functionality, ETWs, scooters and bikes offer quick mobility, good mileage, affordability and convenience for commuting. However, ETWs/electric vehicles may be considered as a separate segment for additional factors such as ease of charging, environment-friendly, low maintenance cost and also eligible for Government subsidy. Electric vehicles market is relatively new and the Government is providing lots of incentives in promoting this market through subsidy, developing infrastructure in the form of charging stations, spreading awareness etc. Accordingly, the relevant product market in the instant matter may be delineated as market for manufacture and sale of ETWs. Further, it may be noted that the conditions of demand and supply are generally homogenous across India except differences in taxes imposed/incentives provided by different state governments. Therefore, the relevant geographic market may be delineated as India, and thus, the relevant market in the instant matter may be carved out as market for manufacture and sale of ETWs in India.
16. The Commission proceeded to asses dominance of OPs in the relevant market as delineated above. As per publicly available information, it is understood that Ather Energy and Ola entered the electric mobility sector in 2016 and 2017, respectively; Vida World, a unit of Hero Motocorp, was incorporated in 2022. TVS, an established player in the motorcycles and scooters market, launched its first electric scooter in January 20201.
17. The Commission notes that as per the Informant, Ola, TVS Motors, Ather and Vida held 17.57%, 7.51%, 8.32% and 15.75%, respectively, in CY 20222. The Commission also notes from the information available in public domain3 that Hero Electric and Okinawa are having a market share of 28.23% and 20.08% respectively, followed by Ampere with 10.65% market share, whereas the OPs Ather, Ola and TVS garnered a market share of 8.63%, 6.21% and 4.09%, respectively, in FY 2022. Thus, the Commission notes that none of the market players appear to have a stable market share or position.
18. The Commission also observes that apart from the established groups such as Hero and TVS, there are a number of other major players such as Okinawa, Ampere, Ather and Ola having significant presence in the relevant market, besides new entrants such as RGM, Booma Innovative and Chandana Corporation.
19. The Commission also takes note that electric vehicles market is in growth stage with players coming up with lots of varieties and affordable ranges, and the competition is expected to intensify as more players fight for the market share and quickly ramp up production.
20. In view of the foregoing, the Commission notes that there appears to be no single player which is able to exert market power in its favour or appears to demonstrate a position of strength to operate independently of market forces in terms of explanation (a) to Section 4 of the Act, in the relevant market. Therefore, none of the OPs appear to have a dominant position in the relevant market.
21. Given the facts and circumstances of the present case, the Commission finds that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against any of the OPs in the instant matter. Accordingly, the information is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act. Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises and the said request is rejected.
22. Before parting with the order, the Commission notes that the Informant has prayed for grant of confidentiality over its identity and documents that may reveal its identity. Accordingly, in terms of the Regulation 35(1) of the CCI (General) Regulations, 2009, the Commission directs to keep the identity of the Informant and the documents revealing its identity confidential for a period of three years from the date of passing of this order.
23. The Secretary is directed to communicate to the Informant, accordingly.