Two Wheeler Industry potential for Electrification
As in most Asian countries, India has a love for two-wheelers — motorcycles, mopeds and scooters have been a primary feature on Indian roads, and before them the humble bicycle. The sense of owning a two-wheeler has always been the initial aspiration for a lot of Indians living in small towns and villages, and a symbol of success for many.
But this aspiration is mixed with practicality. The Indian consumer wants the most economical option and that doesn’t just mean in terms of price; it extends to fuel economy as well. And even when it comes to the electric mobility segment, this has been the primary focal point. For ages, electric two-wheeler manufacturers have tried to match this among their products, but things are changing slowly as more and more manufacturers diversify the product.
In 2020, the electric two-wheelers market segment is slowly beginning to diversify. Today, the consumers are spoiled for choice, and electric two-wheelers are in par with conventional vehicles both in terms of cost, style, looks, power and convenience. According to the PwC report, in FY19, over 7.6 Lakh (0.76 Mn) electric vehicles were sold, which was primarily dominated by two-wheelers (16.4%) and three-wheelers (83%), respectively. The government is walking the extra mile by pushing the electric vehicle adoption in the country, where it is planning to take the Indian electric vehicle market to 28 Mn units by 2030.
According to Data Labs by Inc42’s Electric Vehicle Market Outlook Report 2020, the market share of two-wheelers in India is approximately 20% while three-wheelers with 70% market share lead the way. While electric rickshaws or three-wheelers have seen higher adoption by municipal corporations, two-wheelers have become the focal point for the consumer market.
Is The Hype For Electric Two-Wheeler For Real?
The conventional two-wheeler market in India is expected to grow at an annual growth rate of 7.33% and reach a sales volume of 24.89 Mn units by 2024, from 21.19 Mn in 2019. Data Labs by Inc42 also revealed that there are more than 18 Mn gasoline two-wheelers sold annually. While the conventional vehicles seem to continue to sell like hotcakes, the electric two-wheeler market in India is still in the nascent stage as there is no structured data available to correlate the exact market size estimation.
However, many experts that Inc42 spoke to, said that India is currently home to around 1.5 Lakh units, with other startups estimating anywhere between 80K to 1.2 Lakh sold over the last few years. In FY2018, electric two-wheeler sales almost doubled to 54,800 units compared to the previous financial year. As per Niti Aayog, the electric two-wheeler industry is expected to grow at an exponential rate in the coming years, taking over 80% of the market by 2030.
Today, most electric two-wheelers that you see on the roads do not require a license to buy or ride them (lesser than 25kmph). The options are plenty and the vehicle price also ranges from anywhere between INR 35K and 85K, which is surprisingly lesser than petrol two-wheelers.
Joginder Singh, the owner of an Ampere showroom in Delhi-NCR told us the outlet had sold close to about 1000 electric vehicles since 2017. “There has been an increase in the demand each passing day as people are seeing the value of electric vehicles,” he added.
Interestingly, the Ampere Zeal, which is the most expensive model, cost about INR 85K, and after subsidy, it comes up to 67K, which is almost the same price as Honda Activa. As per the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME), the government had planned to provide financial support of INR 600 Cr for two-wheelers (with a maximum speed greater than 25 km per hour) through incentives.
The electric mobility subsidiary of Greaves Cotton, Coimbatore-based Ampere Vehicle was founded by Hemalatha Annamalai in 2008. The company is backed by marquee investors such as Ratan Tata, the chairman emeritus of the Tata Group and Senapathy “Kris” Gopalakrishnan, former Infosys VP and chairman of Axilor Ventures.
Another prominent player in the electric two-wheeler segment, Hero MotoCorp backed Ather Energy, a Bengaluru-based maker of electric scooters said that it has been integrating intelligence and connected features in a high-performance electric scooter. Recently, the company launched its flagship product 450X, which offers the quickest acceleration in the 125cc category (ICE +EVs). Ather Energy declined to reveal sales figures, but claimed that it has the largest market share compared to the rest of the players in the market. We could not independently verify this claim.
The Secret Sauce For Boosting Electric Two-Wheelers
“Vehicles today must adapt to you and not the other way around,” said Narayan Subramaniam, founder and CEO of Ultraviolette Automotive.
Elaborating on the same, that customers today should look at development in technology across domains. He firmly believes that the automotive industry must be inspired by the consumer electronics space and innovate at the same pace. For electric vehicles to become mainstream in the near future, two fundamental aspects need to be addressed — electric vehicles have to be desirable and range anxiety, the Ultraviolette cofounder added.
Bengaluru-based Ultraviolette is addressing these issues by building an ecosystem to cover the emerging needs of sustainable transportation, both on the product as well as on the energy side. In November 2019, the company unveiled its high-performance electric motorcycle the F77, and it has received an overwhelming response from the market .
Ultraviolette is expected to deliver its first batch of motorcycles by October 2020. “There are a few other companies working on electric vehicles, but we are highly differentiated by technology, capabilities of our R&D team and have multiple vehicle platforms ready for production,”
Is The Future Of The Two-Wheeler Market Electric?
To flesh out the EV ecosystem, Ather said that it has started a corporate programme called ‘Together Electric,’ where it plans to build a network of organisations to accelerate the adoption of electric vehicles in the country, the growing research and development activities are likely to result in a wider product portfolio for electric two-wheelers, thereby positively influencing the country’s electric two-wheeler market.
Today, we are moving towards a cleaner and sustainable future, and it becomes imperative to reduce the dependence on fossil fuels. Looking at the way the electric two-wheeler industry is heading, the technology is more advanced and many companies and startups are offering significantly higher than existing IC engine powered vehicles.
Most importantly, increased efficiency, battery performance, lower maintenance costs, preventive maintenance, smart and connected features are some of the immediate advancements that we see with electric vehicles. And EV two-wheeler makers believe an important aspect is to educate customers, and spreading awareness and breaking myths associated with EV performance so that demand kicks off the chain reaction that catalyses the EV industry.
Ather Energy also brings in thor Ather Grid in Indian cities is a huge initiative taken by the company which will need a lot of investment. Ather Grid is already live in Bengaluru & Chennai with multiple charging points across both the cities. In the coming months, we will be expanding Ather Grid to Ahmedabad, Coimbatore, Hyderabad, Kochi, Kolkata, Mumbai, NCR and Pune. Charging at Ather Grid is open for all electric vehicles.
CONSIDERING CASE OF INDIA:
New Delhi: Government has recently proposed a new plan of making all two-wheelers (up to 150cc) electric by 2025, which contributes 90 per cent of the total two-wheeler market in India.
This has resulted in a major face-off between the manufacturers and the government as the former finds it difficult to achieve this target.
While the government is pushing the industry into deeper spirals of electrification, two-wheeler companies have urged the centre to adopt a practical approach rather than setting “unrealistic” expectations. India is pushing for EV to lower the fuel import bill burden and reduce CO2 emission. The country is home to 15 of the 20 most polluting cities around the world.
Two-wheelers in India consume 60–65 percent of the total petrol.
Currently, the segment is dominated by Hero MotoCorp that commands 39.3 percent of market share, followed by Honda (29,1%), Bajaj Auto (19.3%) and TVS Motor (12.3%). While some have voiced their concerns publicly, the country’s second largest two-wheeler maker Honda Motorcycles & Scooter has completely denied any plans for e-two-wheelers in India any time soon. Collectively, top four manufacturers produce over 16.1 lakh two-wheelers under the 150cc segment in a month of total monthly sales of 17.2 lakh units (in May 2019).
Market share: Top 4 two-wheeler OEMs
Industry estimates suggest that the two-wheeler market is expected to grow at a CAGR of more than 9 per cent by FY2023 whereas ICRA’s long-term estimate is pegged at 6–8 per cent. This implies that about two million two-wheelers will be required to be electrified by 2025.
Who will bear the brunt?
The major impact could obviously be borne by the market leader Hero MotoCorp as this (electrification of upto 150 cc) will take away almost 98 per cent of the company’s business. The company says, to de-risk from the eventuality, it is engaged in developing innovative and advanced technologies for future mobility, including electric vehicles (EVs). It has also invested Rs 130 crore in Ather Energy, an electric two-wheeler startup.
However, investing in other EV firms will not help Hero survive the mandate. It needs to electrify its complete product portfolio to brace the change, as when the norm comes or if it comes, then it won’t be about losses but the company’s existence.
“The scale and timing of adoption of EVs would depend on multiple factors such as nationwide public infrastructure for easy and convenient charging, mass consumer acceptance of products and cost implications,” said a Hero spokesperson.
The wave will also hit Honda Scooter and Motorcycle India (HMSI), majorly it’s scooter segment. Honda sells around three lakh scooters in a month (largest in the segment with 56 per cent market share). The company is already struggling with dampened scooter sales and introduction to BS-VI.
It is likely to take the biggest hit considering it is still analyzing Indian market’s potential for electric vehicles in the coming years.
Recently, Honda announced that they have no plans for bringing in electric vehicles at least till 2020. However, the company has the technology to manufacture electric vehicles and is catering its PCX product to international markets. But not introducing it in Indian markets would lead to wiping off its entire scooter segment.
Bajaj Auto, on the other hand, has indicated its plans to drive in electric vehicles. Around 83 per cent of the company’s sales is from motorcycles under or equal to 150cc. TVS, on the other hand, plans to introduce an e-scooter and is expected to bring its Creon scooter buy the end of this fiscal.
According to industry analysts, only 25 percent of two-wheelers in upto 150cc segment can be electrified, given that the sentiments remain positive, infrastructure boosts, and companies start producing EVs for market.
The question is when the companies have the technology and sources, why are they taking time to consider mass EV manufacturing? One, the transition to mass electrification will require massive investments. According to Bloomberg, China’s electric-car makers have raised $18 billion since 2011. For the Indian market too, companies will need to make similar investments.
Moreover, in a country like India, consumers are still not versed with the concept of driving EVs. Thus, the situation is skeptical about whether the consumer will be able to bear the cost parity. The cost of an electric scooter is expected to be almost double that of existing ICE scooters. For example, an Activa 125 (BS-VI compliant) is expected to cost around Rs 65,000 whereas Ather Energy’s electric two-wheeler, Ather 450 will cost Rs 1.24 lakh.
Since the industry is under a transition phase from BS-IV to BS-VI norms, huge developments and investments are being made for it. Importing lithium, which is a prerequisite for EVs, increases the cost of battery and utilizes more than 30 percent of overall production cost.
Thus, two-wheeler manufacturers are urging the government to reconsider the timeline for mandating electric vehicles.
Bajaj Auto’s Managing Director, Rajiv Bajaj also opined that it is impractical to target such a scale when none of the stakeholders currently possess any meaningful experience with any of the pieces of the EV puzzle.
He further said that targeting a changeover through Corporate Average Fuel Efficiency (CAFÉ) norms/ electric vehicles for all vehicle categories from a particular date such as 2023 or 2025 starting with the most polluted cities of India, can be an appropriate middle path.
Furthermore, jobs will be majorly impacted if the government’s proposal is mandated. Pointing this out, Venu Srinivasan, Chairman, TVS Motor said, “The auto industry globally is still a long way away from all of this, as is India. To force an unrealistic deadline for mass adoption of electric two and three wheelers, will not just create consumer discontent, it risks derailing auto-manufacturing in India that supports 4 million jobs.”
According to a study by FTI Intelligence, changing to lower emission targets by 2025 will lead to a 9 per cent reduction in jobs in European Union, a place where base employment is lesser than a country like India.
Who will bear fruits?
Already established two-wheeler manufacturer, Hero Electric and emerging two-wheeler start-ups like Ather Energy, 22 Motors, Tork Motors among others are likely to benefit if the mandate comes into force.
“We can be one of the largest electrification companies. The 2025 target is ambitious. We clearly have products in the market and credible supply chain. And the two-wheeler market can go towards electrification rapidly as compared to cars, it needs a disruptive few years which is 7–8 years,” said Tarun Mehta, Co-founder, Ather Energy.
Ather Energy has raised $51 million (about Rs 360 crore) in its latest round of funding and is planning to set up a new manufacturing facility as well as charging infrastructure in multiple cities to attain annual sales of a million units in the next five years.
Parveen Kharb, Founder and CEO, 22Motors has also welcomed the government’s push for electric two-wheelers taking over the sub-150 cc segment by 2025, but called it an “aggressive statement”.
“This goes with our strategy of products too. In the commute segment, we are always talking about electric vehicles,” he said.
Hero Electric undoubtedly has a higher market share in e-2wheelers (around 70 per cent) and the vision is most likely to benefit the company in a positive way in the next few years. The sales for the company have not been great in terms of volume but are bullish for the coming few years.
The big electric two-wheeler opportunity for India is here:
The ingredients are coming together for a massive adoption in electric scooters. Many parallels exist between the emergence of China’s EV market and the near-term potential in India. Contrary to the West where the four-wheeler provides the electric foundation, China’s electric foundation was laid in electric bikes and scooters. India can follow the same path, but the adoption could be much faster. China’s electric dreams began small. It sold 40,000 electric two-wheelers in 1998 in the early days of electric push. But as battery quality improved and regulations supported the sector, sales grew to 1.7 million units in 2002. Post-SARS, in 2003, sales more than doubled to 4 million, and to 10 million by 2005. The customer sentiment was that electric scooters were better trade-offs to public transport (speed versus the bus, and convenience versus the subway), especially regarding the potential for spread of disease. This business opportunity created hundreds of companies in two-wheeler EV design, batteries, services, etc, and planted the seed for an EV ecosystem. This, along with incentives, provided the knowledge and manufacturing infrastructure to move on to buses and then cars.
China now accounts for about 99% of the total two-wheeler electric stock, or roughly 257 million vehicles. India sells 20 million two-wheelers per year (of these, 6 million are scooters). Scooter sales alone are more than two times car sales. Though EVs in the two-wheeler market are increasing, 2019 EV sales represent a tiny percentage of the market (126,000 units). Like any tech shift, a combination of factors can help adoptions reach inflection points and then take off. Electric scooters have a lower total cost of ownership than petrol ones. With battery costs trending downwards and battery recycling companies offering buyback prices, cost of vehicles will reduce.
Covid-19 has also increased awareness around pollution and a near-term preference for non-public transportation options. FAME-2 and other policies also keep nudging us towards that inflection point. Another positive trend has been e-commerce and delivery-based businesses. Electric scooters have significant tailwinds right now. The two-wheeler market offers India a unique opportunity to become a major EV country, and it’s also the fastest way to start reducing our emissions.
References:
- www.overdive.com
2. www.powerdrift.com
3. www.carwow.com
