Start-ups rush to join electric two-wheeler race as big boys wait

It could have been the best of times for two-wheelers. After all, India has grabbed the top slot from China recently as the largest manufacturer of conventional internal combustion engine sp(ICE)-powered two-wheelers.

But there is some worrisome news. The market is quickly changing, and electric two-wheelers powered by lithium-ion batteries, which will substantially reduce emissions, are increasingly catching the fancy of consumers. Governments are also offering sops to make them popular and cheaper.  

And here, China dominates the market globally. India is a very insignificant player. Last year, China produced 26 million electric two-wheelers compared to a mere 0.1 million in India in FY19, according to data from the Global EV Outlook 2019 published by International Energy Agency. What’s more, China has over 250 million electric two-wheelers while India is in its infancy, with merely 0.6 million vehicles.

Concerned that India might just lose its leadership position, NITI Aayog, the government think tank, convened a meeting with two-wheeler manufacturers last fortnight, pulling them up for not investing in the EV transition as well as suggesting a stiff time line to them: by 2025, all new ICE-based two-wheelers would be banned.

That has not gone down well with the big beasts of the business such as Bajaj Auto, the TVS group, and Hero Motors. They have hit back publicly against the government, saying such a move will impact jobs and pointed out that even the basic requirement of a robust battery manufacturing and charging infrastructure is not in place.

They have a point. But the sobering news is that a bevy of Indian start-ups — Ather Energy, 22 Motors, Tork Motors, and Revolt Intellicorp (from Micromax founder Rahul Sharma) — have already quietly jumped onto the electric two-wheeler bandwagon while the big boys still wait and watch.  

These start-ups are collectively putting in over $500 million to design and make electric two-wheelers and create the charging infrastructure to make EVs a reality. They are getting the backing of Indian and global companies and PE funds.

“We already have a credible EV industry in place. Our company has already spent Rs 300 crore on R&D,” said Ather Energy CEO and founder Tarun Mehta, who has recently raised $51 million, a large part of it from Flipkart founder Sachin Bansal.

These manufacturers hope that in next three years, they will achieve scale and be able to sell 1.5-2 million electric two-wheelers per annum. To achieve this, they are working on building a charging infrastructure.

To give comfort to customers, they are banking on a simple, low-cost, solution – offering  inexpensive 5 ampere chargers and, if needed, a docket for the battery to charge in homes.

Ather is incorporating the charger within the cost of the vehicle. It is supporting this with a plan to put in over 6,000 charging stations in 30 cities over five years. The goal is that no one should have to travel more than 4 km to get to a charging station.

Gurugram-based 22 Motors is working on an innovative solution. The company, in which Taiwanese two-wheeler manufacturer KYMCO has taken a 25 per cent stake, has put in two portable batteries of 5 kg each in its scooters (instead of one) to make it easier for consumers.

It will support customers by setting up swapping stations for batteries with charging infra in six cities. “Though average driving in scooters is not more than 15-30 km a day, we are setting up 40 swapping stations from where they can pick up a fully-charged battery without wasting time. We plan to launch this by September,” said Parveen Kharb, managing director, 22 Motors.

Kharb is roping in the small kinara shops to set up a mini swapping station where they can have chargers for, say, two batteries (cost Rs 15,000) to create a third alternative.

Seeing a business opportunity here, many independent players are joining the party. For instance, Panasonic has just announced it will set up 100,000 charging stations in over 25 cities by 2024 to power a million vehicles.

The bigger problem is that, unlike China, there is virtually no domestic manufacturing of the lithium-ion battery, which constitutes 30-40 per cent of the cost of a two-wheeler (although many, such as Maruti Suzuki with Mitsubishi) have made announcements. So, it has to be imported.

Nonetheless, Ather is assembling the battery packs in India. While the cost stands at $200 for 1 KwH, Ather expects this to go down to half in a few years. The company has already localised 40 per cent of the total battery cost.  

It’s not that difficult. A full 70 per cent of the cost of the battery is in cells. Yet, experts say 80 per cent of the cell costs can be localised and only a few raw materials need to be imported such as nickel, lithium, and cobalt. With sufficient volumes, it becomes far cheaper to make them in India than import.  

Localisation has been a key focus for Pune-based Tork Motors, in which Bharat Forge has taken a stake. Kapil Shelke, its founder and CEO, says that they worked for two years to ensure that 95 per cent of the components and software, including all the motors, chargers, telematics, and battery management systems etc., are built in house for its 125-150 cc bike, except the battery.

“We are already starting with a 60 per cent localisation of the mobike with primarily the battery being imported from China and Korea. Many of the components are being made by Bharat Forge,” said Shelke.  

Independent companies like ION Energy are offering battery management systems (the software) as well as batteries customised for vehicles.

One major stumbling block is, of course, the 60 per cent price difference between ICE and electric models (without a government subsidy of up to Rs 22,000), even though the operating costs of an electric model are one tenth those of an ICE-powered scooter.

22 Motors is planning to lease out the batteries for rental rather than bundling the cost with the scooter to reduce the upfront cost.  

Ather’s financing model allows a consumer to pick a scooter by paying a refundable fee and then a monthly fee. This brings down the total outgo of running an electric scooter to a level similar to that of an ICE-powered scooter.

The big two-wheeler boys might think that 2025 is too short a time for a brave new world of all-electric two-wheelers. But with some start-ups aggressively preparing to scale up, at least consumers will have more choice.