As fuel prices rise, electric scooters are finally gaining ground in India

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Mahesh Joshi, 58, a Pune-based businessman, bought an electric Chetak for his wife eight months ago. The electric scooter quickly became his favorite vehicle. The overall impressive and hassle-free operation of the scooter and sky-high fuel prices made its gasoline motorcycle redundant. He is now anxiously awaiting manufacturer Bajaj Auto to reopen reservations for the model so he can purchase another for himself.

Joshi is not alone. Noida-based Avinash Sharma bought an Okinawa I-Praise electric scooter a few months ago. Since then, his old motorbike has been idling in the parking lot.

Satisfied customers like Joshi and Sharma explain why many think India electric vehicle revolution could be driven by two-wheelers. The running costs of electric scooters are only a tenth of those of internal combustion two-wheelers, and a persistent rise in fuel prices only increases this difference. Two-wheelers also make up 81% of vehicles on the roads of India, and since they are much cheaper, the payback period is shorter than electric cars.

Electric scooter market

However, the current numbers are tiny. India sold 1,52,000 electric two-wheelers in 2019-2020, up from 1.26,000 in 2018-2019. This exercise slowed down the increase, as the Covid-19 pandemic wreaked havoc on the economy: a total of 143,821 electric two-wheelers were sold over the past year, a decrease of 6% from one year on another, according to Company of Electric Vehicle Manufacturers.

The Federal Government 2019 Faster adoption and manufacture of hybrid and electric vehicles the policy offered a subsidy of up to Rs 1.50,000 per electric two-wheeler. This was supposed to encourage a faster adoption of electric scooters and motorcycles, but only 25,700 high-speed scooters (with speeds above 45 km / h) were sold in 2020. For a market that sells 20 million two- wheels per year, according to the Company of Indian Automobile Manufacturers, the conversion to electric two-wheelers is appalling.

Rajiv Bajaj, managing director of Bajaj Auto, blames the introduction of low-speed, low-quality products for the slow adoption of electric vehicles. “When you introduce new technology, it has to be ambitious,” Bajaj said. “The reason EVs haven’t been profitable is not only because the cost of the battery is too high, but also because the products aren’t ambitious enough.”

Tarun Mehta, co-founder of Indian electric vehicle company Ather Energy, supports this: “The problem with electric vehicles in India and around the world has been the lack of good products.”

“Tesla became a success not only because of the grants, but also because the company represented a very successful, ambitious and extraordinary company. [product] in the Model S, ”Mehta said.

Bajaj also believes that the strategy adopted by some of the early entrants is flawed. “If you make an e-scooter for the price of an Activa (costing 81,000 rupees on the road in Mumbai), you won’t make any money.”

Target an ambitious Indian

The electric scooter segment is now aiming higher. Ather, which is backed by the world’s largest two-wheeler maker Hero MotoCorp, launched its first electric scooter, the 450, in 2018. It cost Rs 30,000 more than the Activa. The success of Ather has encouraged traditional manufacturers like Bajaj and TVS already working on electric scooters to position themselves in the high-end segment of the market.

Bajaj launched its first offering under the Chetak brand in January 2020. The response to the model, with its retro-modern styling, has attracted more buyers than Bajaj can satisfy.

Others are also finding that there is healthy demand. “We are getting a very good response from the market,” said Jeetendra Sharma, Founder and Managing Director of Okinawa Autotech.

Potential market

Okinawa Autotech entered the market in 2017 and sells electric scooters under the I-Praise PraisePro and Ridge + brands. He sold over 90,000 units. Sharma believes that after a few years, electric two-wheelers will become much more viable due to the scale of production and will not need subsidies.

Although electric scooters and bikes cost more than those based on internal combustion engines, things are changing. Rising fuel prices and lower lithium-ion battery prices, along with subsidies offered by federal and state governments, are closing the gap, wrote Jinesh Gandhi, analyst at financial services firm Motilal Oswal , in one recent research report. This has the potential to change the competitive landscape of the Rs 34,000 crore scooter segment, with a market size as large as around 5.6 million units, according to the report.

McKinsey Consultancy valued India’s electric two-wheeler market would reach 4.5 million to 5 million in FY 2025, or 25% to 30% of the total market, and nine million by 2030 (around 40% of the total market) .

Get good incentives

Rajiv Bajaj said a city-based approach might work better. “India can set a great example for the world if policymakers follow the mantra of restricting attention to a few cities and then set the goal that after a decade there will be no more motor vehicles. internal combustion, ”he said. This will ensure the participation of even the world’s two-wheeler manufacturers who have so far steered away from electric two-wheelers.

“The country needs both [the] policy stick and carrot incentives, ”he said. The incentives and the low 5% goods and services tax are good measures, but unless it is clear whether they should be maintained, manufacturers may not be doing all they can, Bajaj said.

Some, however, are already taking the bet. In December of last year, Bhavish Aggarwal, founder of the Ola company, announced an investment of Rs 2,400 crore to build a factory with a capacity of one crore of electric scooters by 2022. At full capacity , this would be the equivalent of 20% of the world production capacity of two-wheelers. Its vision is to make India a hub for the production of urban mobility vehicles.

“We want to be world leaders in this area,” he told Business Standard in a recent interview. “We believe we have a very unique opportunity to put India on the world map.”

Sohinder Gill, Managing Director of the Electric Vehicle Manufacturers Company and Managing Director of the Hero Electric Electric Scooter Company said, “Considering the plans of all the companies, especially Ola Electric, it looks like things are going to change dramatically for e-two- wheels in the next two years marking an inflection point.

But Gill is less sure that the transformation will happen as quickly as Agarwal believes. “While he [Agarwal] estimates that this will happen by 2022, the rest of us estimate that it will take another seven to eight years for the market to reach that scale, ”said Gill.

Policy issues

Gill’s company, Hero Electric, is India’s largest and oldest producer of electric two-wheelers, and it has suffered its fair share of setbacks. The policy of adoption and faster manufacturing of hybrid and electric vehicles II has linked incentives to local production, battery technology, acceleration and speed. Hero, like many others, made low-speed lead-acid fueled products (with speeds below 40 km / h) and relied on imports. He was caught off guard. Out of 52,959 high-speed bikes sold since January 2019, only 31,813 vehicles received grants under the Faster Adoption and Manufacture of Hybrid and Electric Vehicles II program through December 2020, with the rest having been disqualified.

Policy changes prompted Hero to review its line and align its products with the new standards to take advantage of the program. In the year to date, Hero has sold 53,400 units, an increase of 13% from last year, according to the company.

“We now have models that are not too dependent on grants. It will be a similar strategy even in the future, ”said Gill, noting that before the adoption and faster manufacture of Hybrid and Electric II vehicles, all models produced were subsidized, while now only 20% are subsidized. . The average subsidy on the company’s products is Rs 14,000, which is passed on to the customer in full, he said.

Manufacturers of electric vehicles are now waiting for the government to announce the third phase of the policy of faster adoption and manufacture of hybrid and electric vehicles, establishing a long-term roadmap to boost investment and instill confidence. Manufacturers were divided on the merits and disadvantages of the second.

Bajaj believes the previous policy was flawed and failed to achieve the desired results, including making localization mandatory. “It’s like putting the cart in front of the horse,” Bajaj said. “When a new technology is introduced to a market, the priority should be creating demand, as demand will drive scale and scaling will lead to localization.

Others like Mehta of Ather argue that the policy of faster adoption and manufacture of Hybrid and Electric II vehicles has given a clear direction to the industry, and it was only after the policy that there has had credible product launches like Chetak and iQube. “I do not think it is in the interest of the country to encourage such a policy [based in imports] after a decade of failure, ”Mehta said.

Ultimately, it will be buyers like Joshi and Sharma who will determine which policy works.

This article first appeared on The third pole.

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