Two-wheeler EVs: With new entrants dominating the space, are the incumbents losing ground?

The domestic two-wheeler industry has been relatively slow in adopting the idea of electric vehicles. But, with prices of fossil fuels being on fire and pollution norms getting stricter with each passing day, it is fast becoming crucial for two-wheeler manufacturers to explore the idea.

The major enablers for EVs in India:

The ingredients are falling in place for the domestic electric scooter market to grow in India. The government's thrust on making India a global auto manufacturing hub could be the major enabler for the industry.

The government has recently approved a PLI scheme worth Rs 18,000 crore for battery manufacturing. It aims to bridge the infrastructure gap that India is facing. Currently, India depends entirely on imports to meet its demand for batteries. It accounts for more than half the cost of an EV.

New players stepping up:

Newer entrants like Ather Energy, Okinawa, Ola Electric, and Ampere have been proactive in this space. They are looking to aggressively expand their capacity over the next few years. Major two-wheeler manufacturers on the other hand are going slow on the whole idea.

As per the Kotak institutional report, Ola Electric has recently earmarked an investment of Rs 2,400 crore to set up the world’s largest e-scooter plant in Tamil Nadu. It will have an initial annual capacity of 20 lakh units. It can be extended to an annual capacity of 1 crore units (15% of global 2W production).

Ather Energy has increased its annual capacity from 25,000 units to 1.35 lakh units. Okinawa is planning to increase its annual capacity from 90,000 units to 10 lakh units over the next few years. Ampere is planning to increase its annual capacity from 50,000 units to 10 lakh units over the next few years. And, Hero Electric is planning to increase its annual capacity from 70,000 units to 2,50,000 units over the next few years.

A wake-up call for incumbents?

While new entrants are making an inroad, bigger players like Bajaj Auto and TVS Motor are not aggressively marketing the electric scooters due to lower profitability. Premium pricing due to their higher cost of production doesn't make it consumer-friendly either.

However, new players are establishing the infrastructure in India. Ola electric for instance is setting up plants for batteries and other localized components. It will provide them an edge at the later stage to bring the cost of their vehicles down.

With the PLI scheme, the sector has got the government's backing. And, looking at how new players have latched on it, the two-wheeler industry is looking all set heading towards a fresh disruption. In this scenario, the incumbents will need to warm up to this idea in order to stay relevant in the long term.

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