Ola's entry in e-two wheelers to shake up world's largest 2-wheeler market

Entry of SoftBank-backed Ola into the e-scooter segment is all set to charge up the overall market and may fast track the adoption of battery operated vehicles.  However, for manufacturers of internal combustion engine (ICE)-powered two-wheelers like Bajaj Auto, Hero MotoCorp and TVS Motor, who also have aggressive plans to tap into the segment, it’s going to be a double whammy. They will not only have to match the aggressive pricing of Ola’s upcoming scooter and incur a loss at each unit of the e-scooter sold, there will also be an opportunity loss as it will weigh on the volumes of the regular ICE models, said analysts.

Ola is expected to price its electric scooter in the range of Rs 85,000-Rs 1.1 lakh. The price range is one that accounts for 70 per cent of conventional, ICE scooter sales in the country, Business Standard reported on Monday.

Large listed two-wheeler makers are positioning themselves to benefit from the anticipated EV adoption, according to a research report by Emkay Global. “However, considering competition from other OEMs (Hero Electric, Ola Electric, Okinawa, Ampere, etc.), we expect some pressure on market share and margin in the medium term,” it said. India sold a total of 143,837 units of electric two wheelers in FY21, representing penetration levels below 1 per cent. Emkay expects this could improve to 5-10 per cent over the medium term with falling EV prices due to the reduction in battery costs, localisation efforts and scale benefits.

Others concur. Ola is attempting to disrupt the traditional two-wheeler segment with its new vehicle which is expected to be priced competitively, said Aditya Makharia, vice president at HDFC Securities. "We believe that along with the enhanced support offered by the government under the FAME scheme and improving product specs, the traditional manufacturers will face increasing competition from the new age two-wheeler companies,"  he said.

An analyst from a domestic brokerage said, “It’s a double whammy for them (for automakers),”  pointing out that if Ola indeed prices its models aggressively, others won’t have an option but to match it. As a result, they will incur a loss on every unit they sell. “Not to forget, the EV volumes will come at the cost of regular models. Hence it will be an opportunity loss,” he said.

A day after Ola Electric opened bookings for its maiden e-scooter, Bajaj Auto said the company has opened bookings for the Chetak in Nagpur. Launched in January 2020, Bajaj has been launching the model in a calibrated way due to supply related glitches. Previously, the booking slots available for Pune and Bangalore were fully subscribed to, in less than 48 hours and the same is anticipated in Nagpur as well, Bajaj said in a statement.

Rakesh Sharma, executive director Bajaj Auto said the company’s ramp up and booking plans remain unchanged and it’s not being revisited or accelerated because of competition. “As stated earlier, we plan to have a presence in 25 cities by the end of fourth quarter,” said Sharma.  

On Saturday, the Bhavesh Agarwal led-firm said it has garnered 100,000 bookings within 24 hours. While it remains to be seen whether the high decibel pitch ahead of the launch translates into sales, it is catching eyeballs. “No matter how this scooter ultimately fares, it is exciting to see courage & risk-taking being rewarded.  The more entrepreneurs that follow the lead of @bhash & show no fear of failure, the more robust Indian innovation will become…” Anand Mahindra, chairman, Mahindra Group, tweeted on Sunday.

For all the excitement around e-two wheelers analysts are also unsure of the price viability after the end of subsidy. Last month, making an amendment to the FAME incentive scheme,   the government increased the demand incentive for electric two-wheelers to ₹15,000 per KWh from the earlier uniform subsidy of ₹10,000 per KWh for all EVs. It also capped incentives for electric two-wheelers at 40 per cent of the cost of vehicles, up from 20 per cent earlier.

This means, is that an e-two-wheeler with a 1 kWh battery will receive an incentive of Rs 15,000; one with a 2 kWh battery will be eligible for a Rs 30,000 incentive while one with a 3 kWh battery pack will be eligible for an incentive of at least Rs 45,000 (as long as its ex-factory cost is over Rs 1 lakh and below Rs 1.5 lakh).

India sells close to 16 million two wheelers annually.

According to Mahantesh Sabarad, head, Retail Research at SBICAP Securities, while electrification is set to happen at a rapid pace due to the falling cost of ownership of e-two wheelers which is being fueled by incentives and rising petrol prices, one cannot say with surety whether Ola will be a big beneficiary. “Ola’s speed and hurry to launch the model makes me unsure of their success.  There are a lot of unknowns when it comes to their product,” said Sabarad referring to the product specification and overall preparedness.

Meanwhile, others too are gearing for an EV ride. TVS Motor has created a separate vertical for EVs and has outlined a Rs1000 crore investment plan over the next two years, Economic Times reported last week. The launches are targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and three-wheelers. Two Market leader Hero MotoCorp that backs Ather Energy too has aggressive plans for the segment.