Ola's e-scooter entry a litmus test for electric vehicle mobility

Rubber will meet the road when incumbents leverage their R&D, manufacturing, and distribution

Ola’s Electric's ability to scale up manufacturing and deliver on the promises made will be keenly watched once its model hits the road. The rubber will meet the road when the incumbents leverage their research and development, manufacturing, and distribution to expedite electrification in the world’s largest two-wheeler market.

Two-wheeler companies, including Bajaj Auto, TVS Motor, and Hero MotoCorp, that control 35 per cent in Ather Energy and Hero Electric, will need to scale up to protect their turf.  

Scooter marker leader Honda Motorcycle and Scooter India has been conspicuous by its absence. The local arm of the Japanese two-wheeler maker - that controls more than half the scooter market - is yet to announce its electric mobility plans.

“Ola Electric's execution will be crucial, although incumbents now have the bigger onus to accelerate electrification,” writes Nitij Mangal, analyst at Jefferies Equity Research, adding that TVS and Bajaj Auto, which launched their first electric scooters (e-scooters) a year and a half back, need to enhance their offerings.

Even though the aforementioned firms have had a head start on Ola in terms of market entry, uncertainty related to the continuance of the FAME II policy, disruption by the pandemic, and chip shortage has prevented them from scaling up their volumes.

TVS sells 1,000 units of the iQube per month. Bajaj Auto, which has been struggling to ramp up production of the Chetak, has been selling 250-300 units a month. Ather doesn’t disclose volumes. It has an installed annual capacity of over 100,000 units (9,200 units per month), but rolls out a much lower number.

It is only in the past six months that the state and central governments have backed the intent to push electrification in India’s automobile market with incentives and exemptions.  Needless to say, Ola’s aggressive volume targets – half a million in the first year and its confidence in the switch to electric two-wheelers - have not only given existing manufacturers greater confidence, but also spawned several firms in the electric two-wheeler space.

Ola Electric launched its first e-scooter - the S1 - on Sunday at a competitive price point, loaded with bells and whistles, and a compelling specification. The S1 and the S1 Pro claim a driving range of 121 km and 181 km, respectively, versus 70-90 km for e-scooters of Ather (450X), TVS (iQube), and Bajaj (Chetak).

Ola Electric scooters will also have higher top speeds of 90-115 kilometres per hour (kmph) versus 70-80 kmph for peers. The battery size of the S1 at 3-kilowatt-hour (kWh) is comparable to peers, while the S1 Pro has a larger 3.9-kWh battery. Ola Electric commenced bookings in mid-July and received 100,000 bookings in the first 24 hours.  It expects to start deliveries in October.

Rakesh Sharma, executive director at Bajaj Auto, says the company has no plans to change the lines of its business plans anytime soon because of the latest entrant. “We are continuing our plans as they are. Ola’s launch was announced. So, it doesn’t change our planning or approach,” says Sharma.

Officials from Ather, TVS Motor, and Hero Electric were not available for a comment till the time of going to press.

Harshavardhana Sharma, head-auto retail practice at Nomura, says a calibrated approach adopted by conventional two-wheeler makers is justified. They will make the transition to electric at a slower pace, compared to manufacturers of pure electric.

“They (conventional manufacturers) have made huge investments in upgrading to Bharat Stage (BS)VI from BSIV and will not commit very high investments or volumes till they amortise the investment made earlier,” says Sharma.

"Not to forget that the overall pace of transition will be slow as India is largely a motorcycle market and scooters account for only a third of sales. How many people can afford this price?  To my mind, the shift will be much slower than Ola’s expectations," he adds.

Ola believes it is possible to make the transition from petrol to electric in four years.

"The policy push by the government and a concerted effort on two-wheelers, where viability gap is significantly lower than passenger vehicles, will bode well for the faster adoption in the two-wheeler segment," writes Jeffries’ Mangal.  

“Several states, such as Delhi, Gujarat, and Maharashtra, have also increased state-level subsidies for electric vehicles to promote electrification. Rising subsidies, along with new product launches, are likely to accelerate the shift towards e-scooters in the two-wheeler segment,” he writes.