E-2W: Riding the future of e-mobility in India

Electric two-wheelers: Riding the future of e-mobility in India

The electric bikes market in India is projected to reach a value of `17.43 billion by FY2024, from `2.92 billion in FY2019. The e-2Ws have already set a prominent footprint in the States of Uttar Pradesh, West Bengal, Gujarat, Tamil Nadu and Maharashtra. With further development in charging infrastructures, the adoption of electric bikes is expected to increase in other parts of the country as well.

The e-2W market in India is developing on account of increased government policies supporting battery-powered vehicles, the growing cognizance toward the environment, snowballing petrol prices, and strict emission norms. It is not a new development that there has been a constant push for the adoption of EVs in India for a few years now.

The e-2W market in India

India has one of the world’s biggest two-wheeler markets. In 2020, the e-2W market segment is gradually beginning to diversify. The e-2W sales have been slowly picking up and a lot of OEMs are entering the segment. Even the likes of Ola have bought e-scooter makers like Etergo and are planning to bring the offerings to the Indian market in near future. With progressively improving charging infrastructure, the industry is anticipating a decent demand in the coming times. However, a higher price of the models compared to the ICE counterpart, lesser availability of charging options, and lower range has affected the overall sales of e-2W.

In the last two years, more than $600 million of investments have been raised by e-2W companies in India. These investments helped manufacturers not only with high upfront capital required in the initial stages of assembly and supply chain setup, but also in keeping the cost of e-2W low while boosting the quality of the products.

The Society of Manufacturers of Electric Vehicles (SMEV) identifies the current population of electric vehicles in India at one percent of the total number of vehicles on the road. Of these, more than 95 percent are two-wheelers. The responsibility of this disproportionate statistic is on the uninterrupted supply of twowheeled electric vehicles by some fringe assemblers and later some bigger corporates.

Sohinder Gill, Director General - Society of Manufacturers of Electric Vehicles (SMEV) has stated, “One of the main reasons for the stagnant sales is attributed to customers not able to buy products due to COVID-19, which led to lockdown in the country. However, the industry has been quickly able to enter the positive curve soon after the government announced the unlock process.”

As expressed in media reports, he said: “Lately there has been much positive news on the EV policy front from the Central and State governments that have led to higher confidence amongst OEMs, component suppliers, and investors. We look forward to a big push by the government to set right what went wrong with FAME II to assist the generation of demand, which is already showing some green shoots. Some of the measures that could be adopted are removal of the 'range criteria' from two-wheelers for the subsidy, reduction of Goods & Service Tax (GST) on batteries from 18 percent to 5 percent when sold separately, mandating delivery businesses to convert their fleets to EVs, promote e-mobility under ‘Swachh Bharat Campaign’.”

According to Customized Energy Solutions (CES) analysis, in terms of market share, in the high-speed segment (>25 kmph), Okinawa is the market leader with 37 percent share followed by Hero Electric with 33 percent share and Ather Energy with 11 percent share.

Companies like Okinawa, Ather Energy, Revolt Motors, etc. are principally focusing on the high-speed segment whereas companies like Hero Electric, Tunwal, Jitendra EV, GRG Smart Vehicles, etc. are focusing on entry- to mid-level variants of e-2Ws.

OEMs expanding facilities

For deriving the maximum revenue from the swiftly growing Indian e-2W market, original equipment manufacturers (OEMs) are expanding their facilities • In January 2020, Ather Energy announced intentions to build a 400,000-sq ft factory in Hosur,

Tamil Nadu, which would have an annual output of 1 lakh units.

At present, the company operates one manufacturing plant in

Bengaluru, which has a capacity of 25,000 units. The company’s idea behind an additional facility is to meet the rising demand for e-2Ws in India. • In July 2020, Okinawa Autotech capitalized $28.4 million `200 crore) for its second manufacturing plant in May 2019. To be developed in Rajasthan and intended to be commissioned in early 2020–21, the manufacturing plant will have an annual output of 10 lakh units. • In October 2020, Pune-based manufacturer of two- and three-wheelers Bajaj Auto Ltd announced its plans to set up a

Figure 1: Market Share of e-2W Players in High-Speed Segment (>25 kmph), Total Units: 27300 Source: CES Analysis

dedicated production plant for its electric scooter Chetak. • In November 2020, Ampere

Vehicles, a subsidiary of Greaves

Cotton announced its plans to invest around `400 crore to expand its existing capacity to 2.50 lakh units per annum.

Currently, the company is running a facility with an annual production capacity of 50,000 units. • In November 2020, Electric vehicle startup Pure EV announced that it is on course to significantly expand its manufacturing base to a larger facility with an annual capacity of 2 lakh EVs and battery manufacturing capacity of 5 GWh in comparison with the existing capacities of 20,000

EVs and 0.5 GWh, respectively.

Subsidies and regulatory policies

Government subsidies and regulatory environment can go a long way in pushing the sales of EVs. Subsidies have facilitated the market by making electric scooters and motorcycles more feasible for the customer. Some of the supportive initiatives comprise tax exemptions on the purchase of EVs, purchase rebates, and financial incentives to customers.

EV adoption in India over the next five years is going to be essentially driven by two-wheelers and threewheelers. Recent government policies have taken into consideration the need to electrify the motorized two-wheeler fleet. In 2019, the national government recommended a plan to sell only e-2W (up to 150 cc) from March 2025 onward.

Furthermore, to regulate the pollution emitted by vehicles, the central government has skipped Bharat Stage V (BSV) emission standards and directed that all vehicle manufacturers, both of two-wheelers and four-wheelers, manufacture and sell only BSVI vehicles from 1st April 2020. The strict emission standards have led to a surge in conventional fuel-based two-wheelers’ prices in the range of 7-15 percent, which is further projected to benefit the Indian electric scooter and motorcycle market.

As part of the drive towards e-mobility, the government now plans to set up more electric vehicle charging points across the country. Minister for Road, Transport and Highways Nitin Gadkari said that the Center strategies are to set up at least one EV charging station each at 69,000 petrol pumps across the country, to drive people to use more EVs in the future.

Mr. Gadkari had also recommended that EV manufacturers should keep the cost of EVs down to appeal to more buyers and forfeit profit for the time being to reap the benefits later. He had said, "Reducing cost may result in some losses initially, but will bring great benefits. As a marketing strategy, you have to reduce the cost to get numbers."

Fall in Li-ion battery prices

Another important factor driving the growth of the Indian electric scooter market is the projected cost reduction of Li-ion batteries in the upcoming years, resulting in economies of scale. Battery constitutes about 40-50 percent of the total EV cost. At present, practically all the EV manufacturers import Li-ion batteries from China, Japan, and South Korea, due to lack of raw material and a value chain still in infancy. However, the recent focus of major Li-ion battery stakeholders on developing batteries and related systems locally is projected to certainly impact the Indian electric scooter market. At present, a battery is priced at around $260/ kWh, with the price projected to drop to around $145/ kWh in the next five years, thus making electric scooters more affordable for customers.

Furthermore, the majority of the e-2Ws sold in the country have sealed lead-acid (SLA) batteries, and each such battery contains 10–20 kg of lead, which is an exceedingly toxic substance. Li-ion batteries have a higher power density than SLA batteries, thus making the former lighter and more efficient. Additionally, Li-ion batteries have a greater life span (more than 2,000 charge cycles), compared to SLA batteries (maximum 400 charges), and the former is faster charging as well. The added advantages of Li-ion batteries will position them with conventional IC engines, thus helping the sales of Li-ion-battery-driven e-2Ws.

At present, the country is moving towards a cleaner and sustainable future, and it becomes vital to

reduce the reliance on fossil fuels. Looking at the way the e-2W industry is heading, the technology is more advanced and many companies and startups are offering considerably higher than prevailing ICEpowered vehicles.

Most significantly, increased efficiency, battery performance, lower maintenance costs, preventive maintenance, smart and connected features are some of the immediate advancements that we see with EVs. And e-2W makers feel an important aspect is to educate customers, and spread awareness, and break myths associated with EV performance so that demand kicks off the chain reaction that catalyzes the EV industry.

To learn more about the present developments in the e-2W market in India, ETN spoke to few of the prominent e-2W vehicle manufacturers in the country. Following are the excerpts of the discussion.

NAVEEN MUNJAL Managing Director Hero Electric Vehicles

“As India gears up for indigenization of components as well as technology, we as manufacturers are both, ready and eager. We have already started manufacturing and/or sourcing several components locally. There are certain challenges or limitations with certain parts that currently need to be imported.”

COVID-19 pandemic and the e-2W market

It’s not that the two are independent of each other or directly related. The e-2W market in India has been on a growth path and the pandemic, especially the lockdown, highlighted the importance and need for EVs more than it has ever before. It takes something truly terrible to shine a light on what’s good, and the COVID situation has brought about a more determined outlook of people towards e-mobility. People are realizing the importance of switching to emission-free transport and e-2W make the most sense as it serves as a daily driver to people looking for a clean, yet economical, personal mode of transportation.

2020 and future trends in e-2W sales

This year we had to cut back on manufacturing as demand, although high given the COVID situation (compared to other industries, which have seen a total and complete decline in sales), numbers still have been a challenge compared to the previous year. A modest 50,000 units have rolled out of Hero Electric this year, equalling the figures from 2019. The future, however, has a growth trend with humble figures asserting a 20 percent Y-o-Y increase in numbers. Although a drop in the ocean of two-wheelers in India, any customer who chooses to switch to an e-2W from an ICE two-wheeler is a win for the EV industry and a win for the environment. Market predictions place 80 percent e-2W penetration amongst two-wheelers in India and we are working hard to ensure that happens.

Phasing out of 2W by 2025

Technological innovations are like energy – they never truly end or get lost, they get transferred. Why should the transport industry be any different? With the government preparing the industry for a major overhaul, the manufacturers have ample time to slowly and gradually phase their production technology from ICE to EV. Existing OEMs undergoing this technology shift have the most to benefit as their entire system and resource right from equipment to manpower will witness a major upskilling.

Besides OEMs that will undergo technology shift, this also opens up avenues to new businesses and newer technologies such as autonomous mobility, smart-buildings, and roadways, battery technology, even the IT and telecom sectors would have a major role to play in developing a grid which is capable of providing seamless and glitch-free EV ecosystem.

Opportunities and challenges for local manufacturing

As India gears up for indigenization of components as well as technology, we as manufacturers are both, ready and eager. We have already started manufacturing and/or sourcing several components locally. There are certain challenges or limitations with certain parts that currently need to be imported.

Auto components and ancillary manufacturers in India will not only enjoy the current supply to ICE markets but also the EV sector now. The need for local manufacturing incentivizes these companies to expand their product portfolio. There’s good news even for those entering especially into EV-based component manufacturing as it will help local companies to develop some worldclass products, which will not only

Optima e-2W by Hero Electric Source: Hero Electric

help upgrade the quality of existing parts but also set benchmarks for a global standard.

The challenges faced today are purely scale based. Due to the low (comparatively) quantity of items the costs are still on the higher side as compared to the ideal market costs. There is also slow movement on asset acquisition by large OEMs as the machinery, due to lower numbers will not provide the breakeven anytime soon.

State e-vehicle policy driving e-mobility adoption

a. Most visible – increase in adoption of EVs especially e-2W due to: • Lower price point • 80 percent of the market in India is focussed on 2Ws, making it the most accessible sector • Easier in terms of lifestyle/habit change compared to cars and/or buses • More options for e-2Ws compared to e-4Ws b. Industry – this will give birth to technology companies and an incentive to existing ones to innovate further, giving OEMs and customers both, highly efficient products. c. Infrastructure – as the numbers of EVs grow, the infrastructure to support these vehicles on road will grow parallelly. d. More players would enter the market giving rise to competition, which is rather welcome as it would not only standardize the expected quality and performance but also enhance it each passing year. e. Financial firms will enter the market as well in a big way – as it is with ICEVs making EVs more affordable and accessible to consumers.

Industry takeaways from 2020 and outlook for 2021

2020 has been a challenging year for everyone. The pandemic has spared no individual nor a single industry. Morale and capital have been low and people, companies, industries are trying to be thrifty since the end of this pandemic is still unsure. However, every cloud has a silver lining; as mentioned before, the pandemic has brought about massive awareness amongst the citizens of the country on the benefits of switching over to clean mobility. A large number of people have already started ditching their ICE vehicles and opting to go electric. This is the collective result of brands, governments both State and Central, and the pandemic that has brought about a positive change in the mind-set of people. When the results are right in front of our eyes, what we have witnessed first-hand, 2021 will be the year EVs will truly come into its own; markets will open up, gradually removing the financial stagnation and this sector will certainly see a rise in numbers.

JEETENDER SHARMA Founder and MD Okinawa Autotech

“In the present time, when the country is going through a global pandemic, we have seen people getting inclined towards EVs over ICE vehicles. This validates the developing trust in technology; and we are encouraged to maintain the same and live up to the expectations of our customers.”

COVID-19 pandemic and the e-2W market

Yes, the industry has observed a spike in e-2W sales. Within a month after the nationwide lockdown guidelines was eased, we retailed over 1000-plus units. Also, we did witness a good sales numbers during the festive season. This demonstrates the escalating demand for EVs and the transition in the mind-set of the people. as preferred way for future sustainable transportation. The mission is to develop technology and deliver the EV that is just as competent as their ICE counterparts. The ambition to transit to e-vehicles has unlocked prospects for the manufacturers to be innovative and upgrade their technology at a faster pace.

Opportunities and challenges for local manufacturing

The major struggle for EV manufacturers right now is the availability of battery cells. It is a raw material that is not obtainable in India and is imported from countries like Japan, China, South Korea, etc. There is a lot of research and development going on in the country to address this. Once, we commence manufacturing these in India, then there is no stopping.

2020 and future trends in e-2W sales

We retailed over 70,000-plus units by the end of November. We anticipate the graph going up in the upcoming time.

Phasing out of conventional 2W by 2025

The complete idea is to become a country that is on its way towards implement ing e-mobility

Government’s approval for ACC batteries

As mentioned, all EV manufacturers are presently importing the related components. The only way to reinforce the local industry is to cut down on the imports to shift the dependency of the manufacturers towards the local suppliers. And to further encourage local suppliers to accelerate their offerings. All this together has put the complete growth of the industry on the fast-track.

State e-vehicle policy driving e-mobility adoption

E-mobility is one mission that has established attention at both Center and State level. The Delhi EV policy is an example of how genuine the government is to boost the adoption of e-mobility. At the outset, when we arrived into the EV space, we had it in our minds that this is going to take longer than any other technology acceptance. The reason is that ICE is a habit and EV technology itself is new. We were endeavouring to influence and bring a change in the very habit of the consumers. Nevertheless, with the constant support from the government, everybody – customers, manufacturers, suppliers are on the winning side. Each stakeholder is taking home something extra. This has fast-tracked the growth of EVs in the country.

Industry takeaways from 2020 and outlook for 2021

In the present time, when the country is going through a global pandemic, we have seen people getting inclined towards EVs over ICEV. This validates the developing trust in technology, and we are encouraged to maintain the same and live up to the expectations of our customers.

RAVNEET S. PHOKELA Chief Business Officer Ather Energy

“Over the years, e-2Ws have penetrated the market and will continue to witness an increase in demand. The e-2W segment in India is emerging on the account of increased government initiatives and the growing awareness towards a cleaner and sustainable future.”

COVID-19 pandemic and the e-2W market

The lockdown had certainly disrupted the local supply chains and manufacturing and had also impacted the demand for e-2Ws, but the sector has witnessed signs of revival. On the demand side, people who had deferred their purchases are beginning to come back in the market, and that’s been a positive development. One of the important drivers contributing to the growth and adoption of EVs is the growing awareness of the environment. There has been a rise in environmental consciousness in India, thereby the government has introduced several progressive policies and incentives like introducing the FAME II subsidy, lowering the GST on EV to 5 percent, offering income tax rebates on the purchase of EVs which has helped in creating consumer demand for e-2Ws.

There are two key segments of owners in EVs today - one that is looking at EVs purely from a TCO perspective, and the other that sees EVs as the future of automobiles, and is technologically superior. For the first, the tough economic environment makes the case stronger to go for EVs. The second segment is skewed towards the premium end of the market and relatively less vulnerable to the economic environment.

2020 and future trends in e-2W sales

When this year began, Ather Energy was available only in two cities - Bangalore and Chennai. On January 28, we launched Ather 450X aiming to go to 10 markets by the end of this year. Ather Energy is available in seven of those cities now and we have added one more market - Kozhikode and we plan to expand to more than 30 cities by the end of FY21. Ather Grid which was available only in two cities is now available in eight cities and we plan to add charging stations at an additional 135 locations in 11 cities by December 2020. With our latest round of Series D Funding, we believe that we will be able to accelerate our expansion plans and speed up the deliveries of the Ather 450X.

Over the years, e-2W have penetrated the market and will continue to witness an increase in demand. The e-2W segment in India is emerging on the account of increased government initiatives and the growing awareness towards a cleaner and sustainable future.

The demand will certainly pick up in the coming years, as EV manufacturers will introduce high-quality and well-performing products that are viable alternatives to ICE vehicles. A host of innovations are also seen among a lot of young companies who are building EVs and are focusing on making them more innovative and appealing than their petrol counterparts.

Phasing out of conventional 2W by 2025

The EV sales have increased over the past five years with an increased uptick in the adoption of high-performance e-2Ws. The e-2Ws account for nearly 97.5 percent of all EVs sold in FY20 and it is a trend that we see continuing. Today, lower performance specs e-2Ws make up a significant chunk only because of the lack of alternatives. We will witness a transition in the coming years with new and existing brands launching more efficient and powerful e-2Ws that are near-equal or better in performance than their ICE counterparts.

Opportunities and challenges for local manufacturing

The Indian auto industry has the potential to dominate the world, and for that, the supply chain must be vibrant. If we have a solid supply chain, it incentivizes new players to come in as they are not at the mercy of a handful of component manufacturers. And, eventually, when scale kicks in, costs will automatically go down as well. The government has given time for the industry to switch to complete localization. We must now go step by step from motors, controllers, and other EV-related components.

The components sector was slow to start, perhaps waiting for stronger signs of EV adoption. However, we are seeing a lot of action there, given the rising demand for EVs. Whether it’s the global players looking at setting up local manufacturing, or Indian players entering the space, the intent is very clear. Though the supply chain is growing in the right direction, there is still some time before it can cater to the scale that we need. These are early days, and very few suppliers can meet the eventual demand in the sector.

We have been working very hard to localize our product and as a result, other than cells, all our components are locally sourced. The tough road we took a few years ago, choosing to build a local supply chain and not be dependent on imports, is now bearing fruit. In fact, not only are the batteries that we use been designed by us, but we also manufacture them in-house. We probably are the only OEM in India that makes their batteries. This makes the Ather 450 series a truly ‘Make in India’ product.

Government’s approval for ACC batteries

The PLI scheme announced by the Central government for manufacturing ACC batteries looks like an interesting prospect and solidifies their intention of making the Indian automobile sector electric. With a package of `18,100 crore being made available to manufacturers of lithium-ion and other advanced batteries, will push for the

Ather 450x Source: Ather Energy

burgeoning industry to increase its rate of growth and also allow them to create more job opportunities domestically, while making a mark on the international market.

At Ather, we have been manufacturing our batteries for our product line since 2018 and are looking forward to expanding our production so we can meet the demand across the country.

State e-vehicle policy driving e-mobility adoption

With a massive focus on e-mobility around the world, India needs to push the adoption of EVs and develop the infrastructure. Therefore, the centre has introduced several policies such as FAME II and the phased manufacturing plan for EVs. Even the State governments are offering additional subsidies for end consumers and have also introduced policies that have focused on creating attractive incentives for OEMs to set up manufacturing plants. These initiatives will act as a catalyst to the development of the sector and will address the apprehensions of the manufacturers, sellers, and customers. We are hoping that this will increase the adoption of EVs and the government will continue to boost EVs by coming out with policies of incentives, fiscal SOPs, and encouragement to expand this ecosystem.

Ather Energy has signed an MoU with the Tamil Nadu government for a 400,000 sq ft manufacturing facility in Hosur. The new facility is supported by the State government's EV policy and will create job opportunities in the region.

Industry takeaways from 2020 and outlook for 2021

While 2020 has been a tough year, it made us realize the value of building a strong organization with deeply committed teams. By teams, I mean both, internal employees as well as external partners such as suppliers, dealers, etc. The last few months have been very demanding. The impending start of the new manufacturing facility, planning entry into multiple markets, managing supply chain disruptions, while we migrate from the Ather 450 to the new products - the Ather 450X and 450 Plus. It has been encouraging to see how employees rose to the occasion and managed to guarantee that the impact of the pandemic was marginal. Our plans moved by a quarter, without compromising on the scale of what we wanted to accomplish. We also were privileged to have supportive partners both in the retail and supply chain, who worked with us untiringly to guarantee that our plans didn’t need to change. 2021 is another year. We enter it with optimism that the worst is behind us, as we commence the next phase of our journey. This will be the year when we hit a massive scale, with an exponential increase in sales volumes and venture into 60-70 new markets.

Moulin Oza Assistant Editor ETN