Published on 25th February 2020
India is one of the world’s largest two-wheeler markets with sales of more than 21 million scooters and motorbikes in 2019.
Indian Electric Scooter and Motorcycles market target is to hit 90% electric by 2025 as per the recent government release from a Think Tank activity chaired by the Prime Minister aiming to dramatically cut pollution and reduce the fuel import bill. However, the target can be achieved only with disruptive policies.
The think-tank, which plays a key role in policymaking, had recommended that only electric models of scooters and motorbikes with engine capacity of under 150cc must be sold from 2023. Major automakers in the country opposed the proposal and warned that a sudden transition, at a time when auto sales have slumped to a two-decade low, would cause market disruption and job losses.
However, many of the best selling two wheeler manufacturers are transitioning to electric. At the same time there are many other companies that are yet to launch their electric vehicle models in India. Moreover, the reduction in GST rate for electric vehicles from 12 percent to 5 percent, which is lower than the 28 percent GST applicable on ICE, makes EVs much more attractive to the consumer and at the same time incentivizes EV makers.
Government approved the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India under (FAME-II) scheme. FAME-II offers support for electric vehicles and charging infrastructure of approximately USD 1.39 billion over 2020-2022. Standards for charging infrastructure were also issued in October 2019. The government is also exploring incentives for manufacturing electric vehicles and batteries to boost economic growth and encourage local manufacturing under the Make in India initiative.
An electric two-wheeler is eligible for a subsidy of INR 10,000 per kWh (kilo-watthour) of battery capacity. A sum of INR 2,000 crore has been earmarked in the FAME India scheme for supporting the sale of a million electric two-wheelers by the end of March 2022
Individual states are also developing electric mobility policies and initiating pilot projects. Government-owned companies are beginning to roll out charging stations. As an example, Energy Efficiency Services Ltd is looking to install 10,000 stations by 2022.
Electric vehicle supply will also be a critical factor for adoption. The top five electric two-wheeler manufacturers are expected to increase their capacity for electric variants from 0.4 million units in fiscal 2020 to over 3 million units by fiscal 2024.
Many ride sharing companies, food delivery platforms and cab aggregators are looking to shift electric attracted by excellent operational economies and subsidies. As an example, the ride-hailing service provider Ola aims to deploy 10,000 electric two and three-wheelers in India by March 2020.
India currently imports lithium for all its needs. It imported lithium batteries worth USD 1.2 billion in FY2019, tripled from USD 384 million in FY17. However, situation on the ground is going to change with the new manufacturing facilities set up with a push from the government in the form of subsidies. The USD 5 billion worth projects may develop new manufacturing facilities with a total capacity of 10 GWh over 10 years. The increase in local manufacturing decreases the price of the battery and in turn decreases the overall cost of the EV.
The government has notified phased increase in basic customs duty on parts of electric vehicles to be assembled in India to 15 per cent from April 2020 and 10 per cent on imported lithium-ion cells by April 2021 to promote domestic manufacturing.
Ather Energy is building a new manufacturing facility in Tamil Nadu, and investing INR 635.4 crore in the new green field facility, which will enable the manufacturing of electric scooters and lithium-ion batteries. The increase in demand for electric bike paved the way for the new manufacturing facility.
However, Hero MotoCorp, Bajaj Auto and TVS Motors—India’s biggest two-wheeler manufacturers—have hit out against NITI Aayog’s proposal that all scooters and motorbikes with an engine capacity of more than 150cc must run on electric power from 2025, since it demands migration to a completely new supply chain.
Innovation in Financing
Revolt Intellicorp, has launched two electric AI motorcycles, which can be owned by paying monthly installments. Motorcycle-as-a-service has been initiated for the first time in India with this plan. This removes the challenge of the high cost that is usually associated with electric vehicles. Their bike is made available to the consumers only through an installment payment plan (INR 3000 – 4000 for 3 years depending on the model). This plan doesn’t require any down-payment, or even maintenance and insurance costs because revolt wants to keep its pricing in the affordable category helping them to meet their target to penetrate 60%-70% of the Indian two wheeler market.
An Amritsar-based startup, eBikeGo provides electric two-wheelers on rent to businesses. The company also covers the last mile delivery ecosystem, including service, maintenance and roadside assistance along with inbuilt analytical technology to check the efficiency of the rider. Currently, players such as Zomato, Swiggy, Big Basket, Amazon, and Flipkart are deploying the company’s vehicles and technology. The company has grown from 640 users in 2017 to 18,000 users in 2019. eBikeGo wants to add 25,000 electric scooters to their fleet in the fiscal year 2020-2021 and target new cities.
The current push could disrupt the market order for two-wheelers and open up avenues for local start-ups. Scooter and bike start-ups like Ather, 22Motors, and Okinawa are already making inroads in India.
Considering the present situation the electric motorcycle market is expected to witness a huge growth provided with the proper deployment of infrastructure as planned.