Future of mobility will ride on electric two-wheelers

Electric two-wheelers are emerging as the alternative to petrol two-wheelers as they are pollution-free and cost-effective. Petrol prices have been on the rise for more than two months with more than a 46% hike in a year. However, electric two-wheelers (E2Ws) are redefining private mobility in India. It is one of the few industrial segments where India is still at the initial stage and has huge scope to grow especially after the FAME 2 guidelines. The electric two-wheelers segment is poised to lead the EV transition in India. They constitute 95% of the total electric vehicles on road in India.

Electric scooter market:

At present, there are more than 5 lakh electric two-wheelers and few thousand electric cars on Indian roads. Established players such as Hero Electric and Okinawa commanded over 53% of the market share for high-speed E2Ws in FY2021. Budding players such as Ather, Revolt, and Pure EV too have been contributing to the segment.

According to the Society of Manufacturers of Electric Vehicles (SMEV), the FY2021 sales of electric two-wheelers declined by 6% to 1,43,821 units compared to 152,000 units in FY20 primarily as Covid-19 pandemic that led to complete supply chain disruption in the EV space.

However, according to a report by Autocar, the high-speed electric two-wheeler industry in India had sales of around 25,598 units (-5.97% YoY) in the pandemic-impacted year. But, this segment has started to emerge stronger, and despite the second wave of Covid-19 pandemic 29,288 units were sold in the first six months of 2021.

Ola electric’s entry:

Ride-hailing company Ola has been the talk of the town ever since it announced its entry in the electric two-wheeler segment. The company announced a Rs 2,400 crore MoU with the Tamil Nadu government in December 2020 completed land acquisition in January this year. The company started construction in February, and on Thursday, July 15 it opened pre-bookings at a token amount of ₹499 on its official website for its electric scooter.

The Ola electric scooter received record-high bookings in the segment of over 1 lakh units in 24 hours. Announcing the same, Ola Electric CEO Bhavish Aggarwal on Saturday wrote on Twitter, “India’s EV revolution is off to an explosive start. Huge thanks to the 100,000+ revolutionaries who’ve joined us and reserved their scooter.”

Ola’s new electric scooters are expected to hit the country later this month. Recently, Bhavish Aggarwal also raised $100 million in debt from Bank of Baroda for its electric vehicle manufacturing facility. The plant is expected to roll out 10 million electric scooters a year. Ola Electric’s plant will produce 15% of all two-wheelers manufactured worldwide. About 30%-40% of the production will be earmarked for exports.

Benefits of FAME 2 Subsidy

High cost was one of the major reasons restricting growth in electric vehicles, but recent changes in the FAME-2 scheme increasing the incentives on E2Ws, from Rs 10,000/kWh to Rs 15,000/kWh have changed the scenario. The cap on incentives for E2Ws also went from 20% of the cost of the vehicle to 40% which in return reduced the prices of existing products.

Following this, the governments of Gujarat, Maharashtra, Delhi, and other states came up with their new EV policy benefiting the industry. Maharastra said that for an electric two-wheeler with a 3kWh battery, the incentives will add up to Rs 30,000 per kWh. While targeting 2 lakhs EV on Road Gujarat said to give a maximum discount of 1.5 lakh on Electric 2- wheelers.

Growth outlook:

The future is looking as good as the present for the electric two-wheeler industry. Although e-scooters and bikes cost more than those based on internal combustion engines, things are changing. The recent revision of the FAME II subsidy scheme, rising fuel prices, reduction in lithium-ion battery prices, and states such as Gujarat, Maharashtra, and Delhi announcing strong support to electric two-wheelers, are narrowing the price gap and increasing the scope and potential for these green vehicles.

JMK Research estimates that E2W sales would reach 30 lakh units in the next 5 years, witnessing a CAGR of 84% from FY2021 to FY2026. Manufacturers of electric vehicles expect growth this year and in the years to come. Hero Electric’s managing director, Naveen Munjal, believes EV sales will reach 30 million by 2030, while Ather Energy’s CEO, Tarun Mehta, believes around 40% of petrol-driven scooter sales can be converted into electric scooters by 2025.