India's electric vehicle goals being realised on two wheels, not four

Hurt by high fuel prices, Vinod Gore, a farmer in Gove village in Maharashtra, ditched his petrol scooter for an electric model, underlining how two-wheelers are driving the country’s goal of electrification of its vehicles.

Gore’s electric scooter, built by Indian start-up Okinawa, runs for about 100-120 km (60-75 miles) on a single charge which costs the sugarcane farmer less than 10 per cent of the 150 rupees (USD 2.15) he would otherwise have spent on fuel for the same distance.

“I bought it to save money,” said Gore, who paid 75,000 rupees (USD 1,077) for the scooter and expects to recover the cost in two to three years in terms of savings on petrol and maintenance.

Prime Minister Narendra Modi’s government has set a target of electric vehicles making up 30 per cent of new sales of cars and two-wheelers by 2030 from less than 1 per cent today.

But its efforts to convince carmakers to produce electric vehicles have flopped mainly because of no clear policy to incentivise local manufacturing and sales, lack of public charging infrastructure and a high cost of batteries.

Cost-conscious two-wheeler buyers like Gore might be a better bet. It would also open up a new market for global companies like Japan’s Yamaha Motor and Suzuki Motor that are drawing up initial plans to launch electric scooters and motorcycles in the country.

The potential is huge. India is the world’s biggest market for scooters and motorcycles with annual domestic sales exceeding 19 million in the fiscal year ended March 31, 2018 - six times that of car sales over the same period.

The next biggest market is China, with annual motorcycle sales of about 17 million in 2017.

Electric scooters make up a fraction of the total but are growing fast. In fiscal 2017-18, sales more than doubled to 54,800 from a year ago while electric car sales fell to 1,200 from 2,000 over the same period, according to data from the Society of Manufacturers of Electric Vehicles (SMEV).

By 2030, sales of electric scooters are expected to cross 2 million a year, even as most carmakers resist bringing electric cars to India.

The roadblocks for scooters are fewer. Compared with cars, scooters are lighter, which means they can use less powerful batteries that are cheaper. The scooters can also be charged quickly and more easily, often using existing plug points in homes, and their price is similar to petrol-powered models.

The challenge is that most electric scooters sold today are utilitarian and not as powerful as models that run on petrol that can go faster and climb gradients easily. The supply chain is not robust which means manufacturers need to rely on imported components.

Importantly, electricity supply in smaller towns and cities, where demand is picking up, is irregular although frequent power shortages in India are a thing of the past.

“India’s electric revolution will be led by two-wheelers. It is a value for money equation,” said Sohinder Gill, global chief executive officer at Hero Electric, the country’s top-selling e-scooter manufacturer.

In May 2017, India’s economic policy think tank began discussions to form a new policy that suggested electrification of all new vehicles by 2030 by mainly offering subsidies to buyers.

The proposal faced resistance from carmakers and auto parts companies that considered the shift too sudden and ambitious, and the target was dialled back to 30 per cent.

India is now working on a new policy which aims to incentivise investments in electric vehicle manufacturing, batteries and smart charging, instead of only giving benefits on sales.

The government also wants to push the use of electric vehicles for public use, a revolution already led by three-wheeled autorickshaws. Sales of these vehicles, ubiquitous on Indian city roads, are expected to double to 935,000 units a year by 2023, according to consulting firm P&S Market Research.

“A policy or incentive to help manufacturers of cars or two-wheelers will go a long way in making electric mobility more affordable than subsidising individual buyers,” said Kaushik Madhavan, vice president, mobility at consultant Frost & Sullivan.

A handful of carmakers including Maruti Suzuki India Ltd, Toyota Motor Corp and Nissan Motor Co are testing the ground to launch electric vehicles in the country, some as early as 2020.

Two-wheeler companies are further down the road with Hero Electric and several start-ups including Okinawa, Ather Energy and Twenty Two Motors already selling electric scooters.

Hero, which sold 31,000 electric scooters in 2017-18, expects to double sales every year for the next few years and break even on costs within one year, said Gill.

Japan’s Suzuki Motor is working on plans to launch an electric scooter in India by 2020, while Indian motorcycle makers Bajaj Motor and TVS Motor are also eyeing electric models.

Yamaha, which is developing a global electric two-wheeler platform, plans to bring an electric scooter or motorcycle to India in the next 3 to 5 years, Yasuo Ishihara, managing director of the manufacturer’s India unit, told Reuters.

While Ishihara did not say how much Yamaha plans to invest in its electrification push, he said any investment shall mainly be for power units and batteries and to develop infrastructure with partners.

“Right now the need of the hour is a proper roadmap and a clear policy by the government of India to actually turn this ambition into reality,” Ishihara said.

Gore is pleased with his Okinawa scooter, which he purchased four months ago because it is easy and cheap to maintain and he can charge it at home. The scooter is fitted with a battery that can generate maximum power of 2,500 watts, giving a top speed of 75 km per hour (47 mph), which he says is sufficient for his needs.

His only gripe is that the scooter struggles when going uphill.

“You can’t increase speed on mountains the way you can accelerate with traditional petrol-powered scooters or motorcycles. There is turbo mode that delivers more power but that is still less than petrol scooters,” he said.

Frost’s Madhavan said most electric scooters currently on sale are basic in terms of design, range and performance so that the price can be kept affordable, especially in smaller towns where distances are shorter and buyers more frugal.

But he says there is also a market for more premium models like those made by Bengaluru-based start-up Ather Energy which is designed to appeal to tech-savvy city commuters.

Ather’s scooters are connected to the internet, come with a touchscreen and have a top speed of 80 kph. They cost about 131,000 rupees - nearly twice the amount Gore paid.

Okinawa and Ather are both expanding their production facilities. While Okinawa is already building a new plant in northern India to more than treble its capacity to a million electric scooters a year, Ather is scouting for a site to set up its second plant.

“There is a line of sight now,” said Ravneet Phokela, a chief business officer at Ather which is backed by venture capital firm Tiger Global, adding that there is greater acceptance by buyers and the government is also coming on board.

Ather, whose business model includes setting up charging stations in every city it launches, is working on new products ahead of plans to expand to 30 cities in the next three years.

“There has never been a better time to be in this business than now,” he said.