How 2W market incumbents Bajaj and TVS are flexing their electric muscle

This report has been updated Rakesh Sharma is elated. “The competition is now going to be tougher for our competitors,” says the executive director of Bajaj Auto, India’s fourth largest maker of two-wheelers.

It has been a rollercoaster ride for Sharma of late. Registrations of Chetak, once the dominant scooter brand that has been brought back in an electric avatar, surged to their highest in July, rising 96 per cent from the previous month.

In the process, Bajaj grabbed a 17 per cent share of the electric two-wheeler market (e2W) closing in on its traditional competitor TVS which is at number two . Last financial year it was fourth, behind Ola Electric, TVS, and Ather.

But the “competition for competitors” Sharma speaks of is not just from Bajaj. TVS, which, like Bajaj, has been a dominant petrol two-wheeler company for decades, is also flexing its electric muscle. It sold 5,493 more electric scooters in July than in June— an increase of 39 per cent.

Together, the two incumbents of the two-wheeler industry driven by internal combustion engines (ICE), grabbed as much as 53 per cent of the e2W incremental registrations in July over June. Their combined market share of over 35 per cent in July has turned up the heat for the startup-like companies that have been setting the electric agenda so far.

Clearly, the ICE empire is striking back, taking on the challenge of Ola founder Bhavish Aggarwal. In an interview with Business Standard in August last year, Aggarwal had advised legacy players to shut down their ICE scooters and invest in making “meaningful and quality two-wheelers for their customers”.

Bajaj and TVS appear to have picked up the gauntlet, taking on Ola in the sub-Rs 1 lakh e2W market — a segment they had kept away from and where Ola reigned supreme. No wonder, Ola’s market share dropped from 47 per cent in June to 40 per cent in July. Its incremental increase in registration in July was lower than Bajaj’s and TVS’s.

Volume game

In April this year, Bajaj launched the 2.2 GWH-powered Chetak 2901 at an ex-showroom price of Rs 95,999. A month earlier, TVS had unveiled a 2.2 GWH-powered iQube for Rs 94,999.  

Both are lining up more new models in this segment and are ready to play the pricing game, if required. Simultaneously, they are leveraging their widespread ICE distribution network to expand the reach of their electric offerings.   

That said, Ola has shown speed and aggression in its go-to-market strategy, garnering volumes and grabbing the lead, especially after regulatory problems hobbled Hero Electric and Okinawa. Even in July, TVS has less than half of Ola’s volumes.

Bajaj says there is a reason for its slow start. It wanted to synchronise its supply chain and distribution before ramping up volumes. It took time to localise components and diversify the supply chain. It initially had one vendor for battery cells. Now there are several.

In building manufacturing capacity, Bajaj has not gone much ahead of its sales. Currently, its capacity is 25,000 electric scooters a month, which can be ramped up in six months to 40,000 a month if the market so demands.

It has taken Bajaj time to reach the 50 per cent domestic value addition mark for the electric Chetak, which makes it eligible for benefits under the government’s production-linked incentives. This will reduce costs. However, with the PLI incentives becoming smaller, Bajaj decided not to expand distribution until it had products priced below Rs 1 lakh, where dealers can get volumes.

Sharma says it is not rocket science to know where the volumes are. “You just have to look at the ICE scooter market, of which 80 per cent is in the Rs 75,000- 85,000 range, where Honda Activa reigns. Our competition number one is not Ola but the ICE riders in the Activa segment. Scooters, unlike motorcycles, are a functional product whose price is a key factor,” he says, and adds that though Bajaj already has three models, it is surely “evaluating a couple more”.

The price of its new e-scooter, which ranges between Rs 95,000 and Rs 1 lakh, depending on the state where you buy it, is about Rs 25,000 more than Activa’s. But a consumer travelling 50 kilometres a day can recover the additional cost of acquisition in a year, says Sharma.

With the sub-Rs 1 lakh Chetak in the market, Bajaj is ramping up distribution — from 150 touch points to 3,000 by the time the festival season rolls in.

Different strokes

TVS has stepped on the gas with the IQube, which is available at 750 outlets in more than 450 cities, according to K N Radhakrishnan, CEO and director, who revealed this in an analyst call on Tuesday. He also spoke about plans to launch another electric two-wheeler, to add to the three that are already in the market.

The company plans to sell electric vehicles in the countries of south and east Asia, leveraging its Indonesia facility and benefiting from the free trade agreement. It is also willing to put in more investments.    

Analysts say the varying strategies emanate from the nature of their businesses.

For Ola Electric, which is funded by venture capital and private equity and has just closed an initial public offering, volume growth and market share are critical for valuations and raising funds. For legacy players, which have been listed on the stock markets for long, it makes sense to look for sustainable sales across technologies without spending a lot of money to drive  volume growth. 

In the short term, Bajaj is focused on scooters, which, it believes, are ripe for a transition to electric. But in motorcycles, its mainstay in the two-wheeler business, Bajaj thinks CNG is a good option right now and has launched the world’s first CNG motorcycle: Freedom 125.

It is a view endorsed by TVS, which is looking at the CNG option for motorcycles. “We have to be patient in EV and there will be different technologies which will also be available to customers from CNG to ethanol and electric to choose from,” said Radhakrishnan.       

A big challenge could come from Honda Motorcycles and Scooters India, which has announced an aggressive electric vehicle strategy for India.

The Japanese giant’s rivals however point out that its electric scooters could eat into the sales of the Activa, which is very profitable compared to an electric Activa. For Bajaj, which has no ICE scooter, getting into electric scooters is an incremental business.

Meanwhile, Ola is talking about electric motorcycles, which may be unveiled on the coming Independence Day, possibly taking the battle into Bajaj’s territory.