India’s Electric 2-Wheeler Market: How is it Developing?

In this article, we will be doing a 6-Point Analysis of the Electric Two-Wheeler Market in the country. So, Let’s start with this 6 point analysis.

6-Point Detailed Analysis:

The 6-Point Detailed Analysis of 2-Wheeler Ecosystem will include the following factors:

i) Electric Two-Wheelers Environment:

• 2-wheeler electric vehicle sales have grown with 55% CAGR in 5 years.
• By FY22 sales number will crores 2,00,000 units.
• Fall in battery prices is making 2-wheeler EVs prices comparable to ICE counterparts.
• Internal Council of Clean Transportation (ICCT) states electric 2-wheeler prices will equal ICE prices in 2027 (100km range).
• Electric Vehicles are highly being encouraged by the Government- Central as well as State, where it is providing several benefits and favorable policies. Some of the key steps of Government’s are:
• 18 Indian states announced electric vehicle policies and 6 more are expected.
• GST of EVs is at the lowest slab of 5%.
• Waive off of registration charges.
• Many market experts are expecting that in the coming 5-years, about 70%-75% of total 2-wheelers sales will comprise 2-wheelers electric vehicles in the mid and economic segment.

ii) Localisation of EV Parts:

• Battery cells have the highest % cost contribution at 24% among the auto components.
• Battery cells localization currently is a very low and low expectation of the same to be completed by 2025.
• Chassis & Body has the highest localization.
• Motor & Power Electronic localization is similar to Battery cells but high expectations to complete the same by 2025.
• Mainly the batteries are imported and hence we are more dependent on foreign bodies for this and therefore localization will take time here.

iii) Previous FAME-II Policies:

• 3-Years bank Government of India came up with Faster Adoption and Manufacturing of Hybrid & EV (FAME-II) in April 2019.
• This policy was launched to increase the adoption of electric vehicles in India. This policy stayed till March 2021.
• The budget of FAME-II was Rs. 10,000 Cr. where subsidy was provided of Rs 10,000 per kWh. Also, there was a cap to this subsidy that was 20% of the e-two wheeler cost.
• This policy was aimed to Incentivize purchase of 7,090 electric business. 35,000 4-wheelers. 5,00,000 3-wheelers and 10,00,000 electric 2-wheelers.

iv) Disappointment of FAME-II Policies:

• The target set for the FAME-II policies were not met due to:
• Electric two-wheeler sale till Jan-21 52,959 units. Sales under the scheme were only 31,813 units.
• High localization norms.
• Increase in prices of subsidized products.
• Most of the products did not qualify for incentives.
• Qualified products did not get the amount of subsidies needed.
• Achievement of only 4% of state targets.
• Slump in sales due to COVID-19 pandemic.

v) Revised FAME-II:

• Now again Government of India has extended the term of this policy till March 2024.
• Also, the subsidy has been increased by around 50% to Rs. 15,000 kWh while the maximum cap was now increased to 40% of e-two wheeler cost, which was 20% in the first phase of the policy.
• With these steps, the prices of electric 2-wheelers vehicles can get decrease by Rs. 7,000 and Rs. 20,000.
• Ministry of heavy industries mandated Energy Efficiency Services Ltd (EESL) to procure 3,00,000 EVs for different authorities.

Electric Two-Wheeler Subsidies by States:

• States such as UP, Karnataka, Tamil Nadu, and MP do not offer any direct subsidy to the buyers.
• While most of the states offer 100% of the road tax exemption, Gujarat and Kerala offer only 50%.
• Delhi offers a maximum subsidy of Rs. 30,000 followed by Maharashtra at Rs. 25,000.

EV PLI Schemes from Central Government:

• Central Government has also introduced the Production-Linked Incentive (PLI) Scheme to boost domestic margin while aiming at competitive pricing, generating employment, and reducing dependency on imports.
• Eligibility Criteria for this Scheme:
• Global OEM revenue of Rs. 10,000 crores for 18% incentive.
• Global investments in fixed assets of Rs. 3,000 crores.
• Minimum turnover of Rs. 2,000 crores for 13% incentive
• Total scheme amount for auto and auto ancillary is Rs. 26,058 crores.
• A maximum of 18% incentives will be offered by the government.
• FAME II and PLI scheme for advanced chemistry cell.    
• Govt expects this scheme will bring in investments of Rs. 42,500 crores.
• Expected job creation by the scheme at 7,50,000.

vi) Electric 2-Wheeler OEMs:

• Ola:
• Two Models- S1 & S1 Pro.
• The capacity of production is claimed at 1 crore units per annum.
• Has received more than 1,00,000 bookings.
• 90% localized manufacturing. Only cells are imported from Korea.
• Invested Rs. 2,400 crores to set up a mega electric scooter factory.
• Claims to create annual capacity of 1 crores vehicles.
• Bajaj Auto:
• Entered EV battle with Chetak.
• Expect capacity to increase to 5,00,000 units.
• Forming a new subsidiary for in-house EV manufacturing.
• TVS:
• The company launched TVS IQube.
• Launches in 33 cities. Aims to cover all the important domestic markets till FY22.
• The company has lined up an Rs. 1,000 crore investment for EV.
• Reached capacity of 10,000 units per month previous quarter.
• Separate subsidiary to operate EV business.
• Strategic partnership with Tata Power for installation of charging infrastructure.
• Ather Energy:
• Backed by Hero MotoCorp.
• First start-up to enter electric vehicles.
• Plans to expand the network to 100 cities by FY23.
• The new plant has a production capacity of 1,10,000 units per year.
• Plans to invest Rs. 635 crores to improve the business prospects.
• Hero Electric:
• Market leader as it has one of the biggest product portfolios.
• Investing Rs. 700 crores to set up new factories. Increasing production to 1.3 crores units per year.
• Owns the brand name ‘Hero Electric’.
• Intends to increase dealership to 1,500 dealers this year. Currently 700 dealers.
• The company will increase capacity from the current 1,00,000 units per year to 5,00,000 units per year by Mar-22.

What Lies Ahead in this Segment?

The Electric Vehicle concept is evolving very rapidly in the market which has also led to the birth of new smart-tech start-ups to enter into this segment along with the presence of existing 2-wheeler vehicle players. Currently, as per the plans, Ola looks quite promising in this segment, but it will be interesting to watch how other players- new-age startups like Ather or existing players like Bajaj, TVS, etc. will perform in this segment.