India's e-scooter manufacturers hope to ride out Covid-19 pandemic

Manufacturers are aiming higher on the back of encouraging initial demand

India’s electric vehicle revolution, which was being led by two-wheelers till recently, has suffered a setback from the Covid-19 pandemic. But that is not deterring the manufacturers who remain optimistic of the small but promising segment and believe the tide will turn soon as the pandemic recedes. An encouraging initial response to the new launches in the last one-and-a-half years has made them confident of the road ahead.

Meet Mahesh Joshi, 58, a Pune-based businessman. Joshi bought an electric Chetak for his wife eight months ago. The e-scooter soon became his own favourite ride. The overall impressive, hassle-free running of the scooter and sky-rocketing fuel prices have made his petrol-powered motorbike redundant. He is now anxiously waiting for the manufacturer Bajaj Auto to reopen bookings for the model so that he can buy one for himself.

Joshi is not alone. Noida-based Avinash Sharma bought an Okinawa I-Praise e-scooter a few months ago. His old motorcycle has since been lying idle in the parking lot.

Satisfied customers such as Joshi and Sharma are the reason many believe that India’s electric vehicle revolution might be led by e-scooters. The running costs of e-scooters are only a tenth of those of internal combustion-powered two-wheelers, and a persistent rise in fuel prices is only widening this difference. Two wheelers — scooters and motorbikes together — also make up 81 per cent of vehicles on India’s roads, and given that e-scooters are much cheaper, there is a shorter payback period than electric cars.

After a rocky start with cheap uninspiring models that failed to whet buyers’ appetite, the e-scooter segment is now aiming higher. Ather, which is backed by the largest two-wheeler manufacturer in the world, Hero MotoCorp, launched its first e-scooter, the 450, in 2018. It cost Rs 30,000 more than the Activa. Ather’s success encouraged legacy two-wheeler manufacturers such as Bajaj and TVS, which were already working on e-scooters, to position themselves at the premium end of the market.

Bajaj launched its maiden offering under the Chetak brand in January 2020. The response to the model, with its retro-modern style, has attracted more buyers than Bajaj can cater to. The company was forced to suspend fresh bookings. It reopened the bookings on April 13 this year but had to close it within 48 hours as it was all sold out. Bajaj is hoping to streamline the supply-related issues by June or July and then accept fresh bookings. It currently sells only in Pune and Bengaluru.

Others are also finding that there is a healthy demand. “We are getting very good response from the market,” said Jeetender Sharma, founder and managing director at Okinawa Autotech.

Consultancy McKinsey estimated that the Indian e-two-wheeler market would hit 4.5-5 million in FY 2025, accounting for 25-30 per cent of the total market, and nine million by FY 2030 (around 40 per cent of the total market).

Some are taking the gamble already. In December last year, Bhavish Aggarwal, the founder of the ride-hailing company Ola, announced an investment of Rs 24 billion to build a factory with a capacity of 10 million e-scooters by 2022. At full capacity this would be the equivalent of 20 per cent of the global two-wheeler production capacity. His vision is to make India a hub for the production of urban mobility vehicles.

Sohinder Gill, director-general of SMEV and chief executive of e-scooter company Hero Elec­tric, said: “Seeing the plans of all companies, particularly Ola Ele­c­­tric, it seems things are going to change dramatically for e-two-wheelers in the next couple of years, marking an inflection point.” But Gill is less sure that the transformation will take place as quickly as Aggarwal bel­i­eves. “While he [Aggarwal] beli­eves it will happen by 2022, the rest of us believe it will take ano­ther seven to eight years for the market to reach that scale,” said Gill.

Last month, the government extended the validity of FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme by a year till March 2022. EV makers are now waiting for the government to announce the third phase of the FAME III policy, laying out a long-term roadmap to spur investment and inspire confidence.

Manufacturers have been divided on the merits and demerits of the second one. Some like Rajiv Bajaj, managing director, Bajaj Auto, believe the earlier policy was flawed, and did not achieve the desired results, especially in making localisation mandatory. “It’s like putting the cart in front of the horse,” said Bajaj. “When a new technology is introduced in a market, the priority should be demand generation, as demand will drive scale and scale will lead to localisation.”

Others, like Ather Co-founder Tarun Mehta, maintain that FAME II gave a clear direction to the industry, and it was only after the policy that there were some credible product launches such as Chetak and iQube from TVS. “I don’t think it’s in the interest of the country to incentivise such policy [based in imports] after a decade of failure,” said Mehta.

In the end, though, it will be buyers like Joshi and Sharma who will determine which policy works — provided the pandemic is controlled quickly, of course.

This is an abridged version of a report first published by thethirdpole.net