Why India’s EV Evolution May Happen Soon
Read Time: 3 Minutes
On average, between 18 million and 20 million two-wheel vehicles are sold in India every year (ignoring COVID years). What people tend to ignore is that out of these vehicles, roughly 25% to 30% are scooters and the rest are motorcycles. This poses a challenge for India’s shift to electric vehicles, as there has been no credible electric motorcycle on the market yet. The power requirement for an electric motorcycle is high. It will require a larger battery or battery set. This is a design and engineering challenge. To say that the 20 million vehicles being sold in India every year can potentially convert to electric is wishful thinking at this point.
But there’s reason to hope. People in the business of selling or investing in electric vehicles tend to talk about unit economics without understanding why the conversion will happen at scale. The market shift will happen because an electric vehicle is far superior to those with internal combustion engines (ICE). Compare it to the conversion from feature phones to smartphones in early 2011-12 with the 3G revolution in India. The taxi industry is also a good example of a legacy service confronted with new technology, when Ola and Uber came into existence. Teslas don’t sell just because of ESG or the savings in fuel and maintenance costs. They sell because of the experience they offer. Once someone drives a Tesla, they won’t want to drive anything else.
India has a lot of work to do if it wants to catch up. We’ve essentially been a trading country where we have just been importing kits, putting them together, and selling to the consumer. That will change this year with Ather ramping up and Ola launching electric vehicles.
All of this becomes relevant because of the significant consolidation in the ICE two-wheeler market. Eight OEMs have 100% market share. Six out of the eight have roughly 90% market share. The electric vehicle industry will be significantly different. It’ll be diversified and fragmented. Roughly 25% to 30% of the market will be small companies that will be either local or regional, or specifically catering to one segment, such as delivery.
Unlike traditional ICE vehicles, electric vehicles are easy to design, develop, and manufacture or assemble. From a technology standpoint, a key element that goes into making an electric vehicle is the motor and the battery cells, which are not proprietary equipment. Most global manufacturers buy cells and motors from third parties.
We shouldn’t expect traditional OEMs in India, including Hero Motor Corp., Bajaj, TVS, and Royal Enfield, to make significant progress with electric vehicles. They just don’t have the capabilities when it comes to R&D or software-related technology. Most of their significant improvements have happened through third-party interventions. It will be an uphill task for them to enter the electric vehicle market. It’ll be difficult for them to develop the technology capabilities needed to succeed in electric vehicles. That will require a significant shift in their cultures, in the manner in which they approach product development, consumer-first approach, and in-house software technology capabilities. Hero Motor has made a smart move by teaming up with Gogoro, a decade-old Taiwanese company that created swappable batteries for electric vehicles.
That’s why it’s likely that start-ups will lead the way in electrifying India’s vehicles. The winners will be able to understand consumers’ use cases, requirements, and needs. The reason there is so much buzz around new companies is because they have prioritized capabilities involving the software and embedded electronics. Despite the many challenges, it should be only a matter of time before someone introduces an electric motorcycle that satisfies the Indian market. Until then, there should be plenty of other electric two-wheeled options.
About Sandeep Divakaran
Sandeep Divakaran is currently employed at Consultivest Advisors LLP. Prior to this, Sandeep held CXO and Board positions at Ola Electric Mobility Pvt Limited. He was also a member of the boards of directors at OLA Fleet Technologies Pvt. Ltd., OLA Skilling Private Limited, and Vogo Automotive Pvt. Ltd. Sandeep was founder and CFO of OPC Asset Solutions Pvt Ltd., India’s largest leasing company.
This electric vehicle industry article is adapted from the GLG Roundtable “India’s EV Evolution.” If you would like access to this teleconference or would like to speak with electric vehicle experts like Sandeep Divakaran or any of our approximately 1 million experts, contact us.
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