At the launch of the new Bajaj Pulsar in Pune recently, Rajiv Bajaj threw the gauntlet at two-wheeler startups that are fuelling the electric vehicle (EV) revolution in the country with their prolific announcements, huge investments and product launches.
“Good Indian twowheeler companies are not as lightweight as some startups would like to think.… Are you going to bet on the legacy companies, as you call us, or the startups?” asked the MD of Auto Bajaj. “I would bet on BET (Bajaj, Enfield and TVS) — they are champions. And champions eat OATS for breakfast — Ola, Ather, Tork and SmartE,” he added, a mite boastfully.
Bajaj’s cheeky comments come at a time when battle lines are drawn between legacy players and startups – over 260 of them, at last count — for a bigger share of the Indian two-wheeler market, considered the largest in the world in terms of volume. It logged over 21 million units in domestic sales in FY2019 before Covid-19 brought it down to 17.42 million in FY2020 and 15.12 million in FY2021.
According to data compiled by Jato Dynamics, EV two-wheeler sales were 96,011 in January-October 2021, a jump of 411% over the year-ago period. However, EVs are only 1% of total two-wheeler sales. For contrast, look at the petrol two-wheeler sales over the same period — 9.61 million units.
The legacy players and startups are taking different routes in the EV game — their game plans and timelines are different, based on their estimates of when the country will see mass adoption of electric vehicles.
The government has already set an ambitious target of 80% penetration of electric twowheelers by 2030. The customer is also giving more attention to electric scooters than ever before, thanks to more options in the market, fall in battery prices and rise in fuel prices, EVs’ attaining price parity with conventional two-wheelers because of subsidies, low running costs and a desire to go green.
While the customer is keen and curious, established players like Bajaj and TVS have taken a measured and conservative approach, evident in the way they marketed their two electric scooters, Chetak and iQube, respectively. Both scooters were offered for sale in select cities in a phased manner, unlike the pan-India launches and quick deliveries of its ICE products.
At the same time, startups are amping up the activity by showcasing new electric models, announcing production details and seeking large bookings. In July, Ola received over 100,000 bookings in 24 hours for its S1 scooter. This was spurred by the huge hype around the product and its Futurefactory in Tamil Nadu, which could be the largest manufacturing facility in the world for electric scooters, with an installed capacity of 10 million units a year.
TRADITIONAL PLAYERS
Legacy manufacturers are on a wait-and-watch mode as they believe the transition to electric two-wheelers will have a slow beginning in India before picking up pace. Hero Electric, selling over 33,000 units this year, is clearly the leader of the pack. Okinawa has sold over 18,000 units and Ather 11,900 units. The two legacy players, TVS and Bajaj Auto, are lagging the startups in the sales of EV two-wheelers this year, selling only about 3,000-odd units each.
Legacy players are biding their time for EV penetration to unfold in India. “In developed markets like Europe, two-wheeler penetration (of EVs) is about 6-8%. India can reach these levels in the next two-three years, but as positive forces converge and the demand-supply balance in batteries is reached, it would really gallop afterwards,” says Rakesh Sharma, ED, Bajaj Auto.
“We are building capabilities in R&D, supply chain, manufacturing and a good offline-online customer experience. This plus our existing capabilities can be a powerful combination to lead in the new industry,” he adds.
The two-wheeler major is establishing its presence in all major towns and cities “although overall at this stage our objectives are not volumetric at any cost but capabilities at any cost”, says Sharma. “For dedicated focus we have established a new company to lead us into this brave new world,” he adds, referring to the subsidiary that was announced in July.
TVS Motor is taking a similar route to offer their electric mobility solutions for the Indian market. “We have committed `1,000 crore in the new EV vertical. We see the (electric scooter) segment leading the way as consumers adopt electric mobility,” says KN Radhakrishnan, director & CEO, TVS Motor Co.
With FAME II subsidy and falling battery cost, the customer acceptance will accelerate by 2025, he says. “We are readying a complete portfolio of two- and threewheelers in the range of 5-25kW, all of which will be in the market in the next 24 months,” adds Radhakrishnan.
Hero MotoCorp, the largest two-wheeler player in the country, has yet to introduce its own EV in the market. It seems to be taking an even more conservative approach than other legacy companies, willing to burn cash only if the need arises. The company, however, says it is focused on producing EVs and is aiming for global EV leadership by 2030. Around 15% of the company’s total volumes will come from markets outside India by 2025, says Pawan Munjal, chairman and CEO, Hero MotoCorp.
STARTUP WAY
Ola has a different strategy: it wants to disrupt the market and persuade all Indian two-wheeler customers to switch from petrol to electric by 2025. It is bringing together technological innovations and massive economies of scale for an aggressive pricing strategy.
“The Indian consumer is quite value-conscious. We are building some key technologies ourselves — the battery pack, the motor, the vehicle computer and the software. These are all designed, engineered and manufactured in-house, helping us to significantly reduce the overall price of the product,” says an Ola spokesperson.
Bounce, a Bengaluru based startup which pioneered ride-sharing, is now into manufacturing electric scooters. “With the impending launch of Bounce Infinity, our new scooter with swappable batteries, we are hoping to close sales at over 100,000 units in the coming months,” says cofounder Vivekananda Hallekere. The approach is to remove the cost of the battery from the cost of the scooter and instead offer battery swaps as a service.
“This brings down the total cost of the scooter by at least 40%. Range anxiety is also addressed. This makes it easy for millions of Indians to access EV scooters at lower costs and not worry about infrastructure-related issues. Flexible ownership models such as subscriptions, rent-to-own, outright ownership and buy-back guarantees are moving people faster from ICE to EVs,” says Hallekere.
As consumer choice widens, the EV market will grow at a faster pace. Ather Energy’s chief business officer, Ravneet Phokela, says, “We have already reached the inflection point for the adoption of two-wheeler EVs in India. The ship for massive change has sailed.” The EV movement is boosted by a surge in demand from tier-2 cities. “Our current manufacturing capacity is 100,000 annually and we see ourselves breaching this in the next 9-12 months. The company plans to invest `635 crore over the next five years to cater to the rising demand,” says Phokela.
“I see a bigger shift to EVs in the next two-three years,” says Jeetender Sharma, founder of Okinawa Autotech, which plans to clock sales of 100,000 units this year — three times its sales over the previous year.
Industry observers, watching this battle from the sidelines, are not placing their bets on either group yet. “Automotive business is one of scale and those with experience in manufacturing, marketing and distribution will win the race in the long term,” says Ravi Bhatia, president, Jato Dynamics. “For the legacy players, this is too early in the game. Since they are experienced they can enter the arena when the time is right,” he adds.
Legacy players may be treading slowly, but they have manufacturing experience and distribution setup, which will help them sell competitively priced electric products as and when required, says Kaushik Madhavan, VP, mobility, Frost & Sullivan. “Startups have no tried-and-tested platform. They need to identify the right customer and correctly position the product.”
“It is obvious that legacy manufacturers don’t want to upset the ICE apple cart. Their token presence in the EV scooter business is designed to merely test the waters before taking the plunge. Startups, meanwhile, think the time has come for them to seize the initiative and usher the revolution,” says an industry observer, who did not wish to be named. “This is at the core of what’s unfolding in the Indian two-wheeler market currently.”
Hemal Thakkar, director of Crisil Research, says the conversion to EVs will be about 8-10% of two-wheeler sales till 2025. It will gain momentum only after that.
Can one bet on the legacy players to push up production as demand grows or will startups generate buzz and create new customers for its products? That’s a question even Bajaj can’t quite answer now.
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With two-wheelers accounting for 80% of vehicle sales in a country where public transportation is inadequate and cars are out of reach for most, the potential for growth in the electric segment is enormous: BloombergNEF expects electric motorcycles and scooters to account for 74% of all such vehicles sold by 2040, up from less than 1% now.
